MEETING STATE OF CALIFORNIA AIR RESOURCES BOARD

JOE SERNA, JR. BUILDING CALIFORNIA ENVIRONMENTAL PROTECTION AGENCY BYRON SHER AUDITORIUM, SECOND FLOOR 1001 I STREET SACRAMENTO, CALIFORNIA

THURSDAY, JULY 21, 2011 9:00 A.M.

TIFFANY C. KRAFT, CSR CERTIFIED SHORTHAND REPORTER LICENSE NUMBER 12277 CALIFORNIA REPORTING, LLC 52 LONGWOOD DRIVE SAN RAFAEL, CA 94901 (415) 457-4417 APPEARANCES

BOARD MEMBERS Ms. Mary Nichols, Chairperson Dr. John R. Balmes Ms. Sandra Berg Ms. Doreene D'Adamo Mr. Ronald O. Loveridge Mr. Ron Roberts Dr. Daniel Sperling Mr. Ken Yeager

STAFF Mr. James Goldstene, Executive Officer Mr. Tom Cackette, Chief Deputy Executive Officer Ms. Ellen Peter, Chief Counsel Mr. Bob Fletcher, Deputy Executive Officer Ms. Lynn Terry, Deputy Executive Officer Ms. Mary Alice Morency, Board Clerk Mr. Jeff Lindberg, Air Pollution Specialist, PTSD Mr. Andrew Panson, Innovation Strategies Branch, Mobile Source Control Division, MSCD APPEARANCES CONTINUED

ALSO PRESENT Mr. Chris Abarca, Azure Dynamics Mr. Mel Assagai, Navistar Mr. James Chen, Tesla Motors, Inc. Mr. John D. Clements, Kings Canyon Unified Mr. Nicholas Cole, Car2Go North America Mr. Jay Friedland, Mr. Marc Geller, Plug In America Mr. Jamie Hall, Calstart Ms. Bonnie Holmes-Gen, ALA Mr. Matt Sloustcher, Mr. Reede Stockton, Center for Community, Democracy, and Ecology INDEX PAGE

Item 11-5-1 Chairperson Nichols 3 Executive Officer Goldstene 10 Staff Presentation 11 Board Q&A 27 Mr. Abarca 33 Mr. Chen 34 Mr. Cole 36 Mr. Sloustcher 39 Mr. Hall 42 Mr. Clements 44 Mr. Geller 47 Mr. Friedland 49 Mr. Assagai 50 Board Q&A 54 Motion 77 Vote 78 Item 11-5-3 Chairperson Nichols 79 Executive Officer Goldstene 79 Staff Presentation 81 Board Q&A 90 Motion 95 Vote 95 Item 11-5-4 Executive Officer Goldstene 100 Chairperson Nichols 102 Dr. Froines 108 Dr. Denton 110 Dr. Edgar 114

Public Comment 96 Adjournment 122 Reporter's Certificate 123 1

1 PROCEEDINGS

2 CHAIRPERSON NICHOLS: Good morning, ladies and

3 gentlemen. We have a very nice agenda this morning. It's

4 not every day you get to vote on giving out money and

5 present awards to deserving people. We're very happy to

6 be here.

7 I'd like to open this morning's meeting, before

8 we do the roll call, we will say the Pledge of Allegiance

9 to the flag. Please stand.

10 (Thereupon the Pledge of Allegiance was

11 Recited in unison.)

12 CHAIRPERSON NICHOLS: Thank you.

13 We will now have the Clerk will call the roll.

14 BOARD CLERK MORENCY: Dr. Balmes?

15 Ms. Berg?

16 BOARD MEMBER BERG: Here.

17 BOARD CLERK MORENCY: Ms. D'Adamo?

18 BOARD MEMBER D'ADAMO: Here.

19 BOARD CLERK MORENCY: Ms. Kennard?

20 BOARD MEMBER KENNARD: Here.

21 BOARD CLERK MORENCY: Mayor Loveridge?

22 Mrs. Riordan?

23 BOARD MEMBER RIORDAN: Here.

24 BOARD CLERK MORENCY: Supervisor Roberts?

25 BOARD MEMBER ROBERTS: Here. 2

1 BOARD CLERK MORENCY: Professor Sperling?

2 BOARD MEMBER SPERLING: Here.

3 BOARD CLERK MORENCY: Dr. Telles?

4 Supervisor Yeager?

5 BOARD MEMBER YEAGER: Here.

6 BOARD CLERK MORENCY: Chairman Nichols?

7 CHAIRPERSON NICHOLS: Here.

8 BOARD CLERK MORENCY: Madam Chairman, we have a

9 quorum.

10 CHAIRPERSON NICHOLS: Great. Thank you.

11 Couple of things, housekeeping items. If there

12 is anybody who is here and wishes to testify, I hope

13 you've signed up online or filled out a speaker card. But

14 if you haven't, please do see the clerk and fill out a

15 card.

16 If you have signed up online, you don't have to

17 fill out a card, of course. But we do need you to check

18 in with the clerk so she knows you're here.

19 We will, as usual, impose a three-minute time

20 limit, but we will receive written testimony of any

21 length. And we'd appreciate it if you don't try to read

22 it but just summarize it so you can say within the time so

23 we can really focus on what you have to say.

24 The emergency exits are in the back of room as

25 well as on the side here. In the event of a fire alarm, 3

1 we need to evacuate this room and go downstairs and

2 outside the building until we get an all-clear signal.

3 And I think that is it for housekeeping.

4 So let's get started then with our first item,

5 which is the AB 118 Air Quality Improvement Program

6 funding for fiscal year 2011/2012.

7 This funding plan that we're considering here

8 serves as the blue fingerprint for expending the $40

9 million that we received for incentive projects in the

10 2011 to 2012 State budget, and we're very grateful to have

11 this funding.

12 The plan establishes ARB's priorities for the

13 funding cycle, describes the projects we hope to fund, and

14 sets allocations. This is the third cycle for this

15 program that we call AQIP for short. And it's been a

16 very, very positive program so far. It's been used to

17 introduce the next generation of clean vehicles to

18 California's fleet. We regard these investments as a down

19 payment an our long-term goals for air quality and climate

20 change.

21 Today's proposal builds on the program's past

22 successes and will continue funding for project categories

23 where we're seeing strong consumer demand.

24 Before I turn to Mr. Goldstene to present the

25 staff report, I do want to say a few words that put this 4

1 in context a little bit, because Mr. Cackette and I have

2 just been in Washington for the past several days and have

3 been there previously for about most of the week

4 beforehand working along with the Environmental Protection

5 Agency, U.S. Environmental Protection Agency, and the

6 National Highway Transportation Safety Administration as

7 well as members of the Obama administration to try to see

8 if we can put together a comprehensive package of

9 regulations for both greenhouse gases and fuel economy for

10 the period 2017 through 2025.

11 As everybody on this Board well knows, our

12 standards really were instrumental in moving the

13 administration to adopt national standards back in 2009.

14 And we were all thrilled in May 2009 when we were able to

15 be participants in this one national program that is in

16 effect for the model years through 2016. And it's

17 basically took the California greenhouse gas emission

18 standards and applied them on the national level and also

19 established a cafe standard that will get us to, on paper

20 at least, 35 miles per gallon as an average for the

21 country.

22 President Obama has announced his goal of

23 doubling that by 2025. There are various ways this number

24 gets expressed or translated in terms of percent

25 improvement per year or percent miles per gallon or 5

1 whatever.

2 But the bottom line is here the intent is to have

3 a very ambitious program and one that California would be

4 proud to consider as an alternative to our own program,

5 although we would always retain the right to enforce our

6 own standards. And we do have a slightly different way of

7 doing this.

8 One important piece of what's different about

9 California and which is recognized not only by the

10 national government but by a number of our fellow states

11 is that we have a mandate for sales of zero emission

12 vehicles. As you all know, we are working hard to revamp

13 that program so that it looks not only at conventional air

14 pollutants but also greenhouse gases and is more clearly

15 integrated into our low emission vehicle standards and our

16 existing Pavley program.

17 But we have been very, very pleased to be

18 included. We've been participants in all the technical

19 reviews that have been going on at the national level, all

20 the meetings with the auto companies, California has been

21 treated as a full partner with the federal agencies. And

22 we've developed as a result of this very good

23 relationships and frankly a lot of respect for the caliber

24 of the work that's going on on this effort.

25 As you have probably been reading in the papers 6

1 and there were a couple of stories in today's paper, we

2 are getting now to the point where the discussions that

3 been going on with the individual car companies are

4 getting to the point where we're hopeful that there will

5 be an agreement and there will be able to be an

6 announcement. And everybody is still very much at the

7 table.

8 But as often happens in a negotiations -- I think

9 any of you who have ever participated in any business or

10 labor negotiations can relate to this, before you get to

11 an agreement, things appear to be falling apart. And

12 there's lots of stories out there in the presents about

13 how things could be falling apart. And it's still true

14 they could fall apart. The fact is I believe there was --

15 well, I know there was an add campaign that was planned by

16 the Alliance which represents the larger companies and all

17 the domestic manufacturers. But they were planning to run

18 in the middle west, which was very negative and would

19 definitely have been inflaming public opinion against any

20 kind of increase in fuel economy standards, or that was

21 the intent. Those ads were pulled kind of at the last

22 minute. Some of them aired. They've been letters back

23 and forth coming from the Michigan delegation and threats

24 and counterthreats of all kinds floating around.

25 So I wanted to -- before we got into this much 7

1 more meaty part of our meeting -- to just kind of set a

2 little kind of a context here to say that we are still at

3 the table. We are still hopeful. And I guess by nature

4 being Californians we are optimistic because we think the

5 science is on our side. The science is on our side, but

6 also economics is on our side. We can see and we've

7 established that the companies can meet very ambitious

8 standards over the period out to 2025. There's just no

9 question that the technology exists, that it's available,

10 that it can be introduced.

11 There are costs. And we understand the different

12 companies are in different positions in terms of how they

13 can do. The biggest area of contention at this point

14 really is with the companies that are reliant on trucks,

15 light trucks that are included in this same category of

16 standards as passenger cars. And admittedly, the heavier

17 trucks -- although we're not including any of the real

18 over-the-road trucks that are not included in this

19 category -- but pickup trucks, lighter pickup trucks are

20 included in this category. And those companies that make

21 gasoline pickup trucks are more challenged in terms of how

22 they can meet a really tough standard. They are allowed

23 under these programs to do it with credits. They can

24 trade credits within the company from the lighter to the

25 heavier vehicles or they're allowed to pay penalties under 8

1 the NTSA program or to trade credits under our program.

2 So there are very -- and they're allowed the bank and

3 borrow. And there's all kinds of provisions for

4 flexibility. And the proposals that we've been looking at

5 are designed to include even more potential areas of

6 flexibility.

7 But the bottom line is that, you know, we

8 recognize that we need to move forward. And so it's just

9 going to continue -- it's going to continue until it's

10 over I guess is the best way to put it. But the time line

11 that we're on is that the President has committed to put

12 out a proposed rulemaking by the end of September. And

13 we're on the same time track to do that. We plan to do

14 the same thing.

15 At this point, I would say that we're not only

16 hopeful, but we are reasonably -- how should I say

17 reasonably confident that we will be able to be in

18 coordination with the Administration. We'll do our

19 rulemaking, but we think we'll be able to match up so the

20 federal cars and State cars can be -- both could be

21 allowed in California.

22 But we're not 100 percent certain of that. And

23 the fact that California does have the ability to set its

24 own standards and that we have done so much, particularly

25 in this area of providing incentives for advanced 9

1 technology vehicles, is what gives us a seat at the table.

2 I mean, the fact that we are a big market and that all the

3 companies have design centers here is also a part of it.

4 But that's also related to the fact that we, Californians,

5 have really put our money where our mouths are when it

6 comes to trying to create a successful market for the kind

7 of vehicles that everybody knows are going to need to have

8 in the future, but not everybody actually is going to see

9 for quite a long time. We get to actually see some of

10 these wonderful cars out there on the roads in a much

11 faster time frame. And we need that, because we have also

12 bigger emissions problems, bigger air quality problems,

13 are more dependent on gasoline and so forth.

14 So I just wanted to kind of tie it back to what

15 we're doing here this morning, because, you know, it's not

16 just something that's nice that we get to spend some money

17 to help bring some more advanced vehicles here. It's part

18 of a bigger and really I think internationally important

19 effort that we're engaged in here. And I hope you all

20 feel as proud as I do about the fact that we're able to do

21 this.

22 Before we actually get into the staff

23 presentation, Tom, if you have anything to add in terms of

24 the talks that we're having right now, I'd appreciate it.

25 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: No. I 10

1 think that covers it very, very well.

2 CHAIRPERSON NICHOLS: Well, all right. Okay

3 then. Mr. Goldstene.

4 EXECUTIVE OFFICER GOLDSTENE: Thank you, Chairman

5 Nichols.

6 AB 118 was signed into law in 2007 and created

7 AQIP which provides ARB about 30 to $40 million annually

8 through 2015 to invest in clean vehicle and equipment

9 projects to reduce criteria pollutants and air toxics

10 often with concurrent greenhouse gas benefits. 118

11 expands our portfolio of air quality incentives, providing

12 the opportunity to fund projects not covered under our

13 other incentive programs, such as the Carl Moyer Program,

14 Goods Movement, and Low Emission School Bus Programs.

15 These focus on near-term emission reductions from fully

16 commercialized technologies.

17 AQIP funds are unique in providing ARB with an

18 ongoing funding source to pay for technology-advancing

19 projects. In the program's first two years, we use these

20 funds to help accelerate the introduction of the advanced

21 motor vehicle technologies just coming to market, such as

22 hybrid trucks and buses and zero emission passengers cars.

23 We're counting on widespread use of these technologies to

24 help meet our post 2020 SIP emission reduction targets and

25 2050 climate change goals. AQIP investments are an 11

1 important early step in a fundamental transformation of a

2 California vehicle fleet necessary to meet these goals.

3 This year's funding plan continues hybrid truck

4 and ZEV incentives, as well as advanced technology

5 demonstration project funding. These projects are working

6 as we envisioned with strong demand and their streamline

7 design makes them easily accessible for consumers. The

8 funding plans also makes it easy for consumers to adjust

9 funding targets if revenues are lower than the amount

10 appropriated in the State budget. This is a situation we

11 experienced unfortunately in the last two funding cycles.

12 Andy Panson of the Innovative Strategies Branch

13 will present the proposal.

14 (Thereupon an overhead presentation was

15 presented as follows.)

16 MR. PANSON: Thank you, Mr. Goldstene.

17 Good morning, Chairman Nichols and members of the

18 Board.

19 --o0o--

20 MR. PANSON: Today, I will present our proposed

21 funding plan for spending the Air Quality Improvement

22 Program, or AQIP, funds appropriated to ARB in the

23 recently signed State budget. We are pleased with how

24 this incentive program is working through the first two

25 funding cycles and we are excited to build on that 12

1 momentum as we embark on our third year.

2 You will see over the course of my presentation

3 that we are recommending continued funding for our largest

4 and most popular project categories with refinements aimed

5 at making our limited funding go further. Otherwise,

6 there are no significant changes from past years.

7 --o0o--

8 MR. PANSON: First for some background. Through

9 the AQIP, ARB receives between 30 and $40 million annually

10 depending on revenues to fund clean vehicle and equipment

11 projects which reduce criteria pollutants and toxics and

12 also provide climate change benefits.

13 As Mr. Goldstene noted, the AQIP expands ARB's

14 portfolio of air quality incentives and provides the

15 opportunity to fund projects not covered through programs

16 such as the Moyer program or the Goods Movement Bond,

17 which focus on near-term reductions from fully

18 commercialized technologies.

19 AQIP has a different focus as ARB's only

20 incentive program that allows for the investment in mobile

21 source technology advancing projects critical to meeting

22 California's post-2020 air quality and climate change

23 goals.

24 AQIP investments today support the deployment of

25 hybrid trucks, zero-emission passenger cars, and other 13

1 advanced technologies that will help us meet our long-term

2 SIP strategies.

3 --o0o--

4 MR. PANSON: Looking further into the future,

5 reaching the 2050 greenhouse gas emission reduction goal

6 will require a fundamental transformation of the vehicle

7 fleet, with zero emission and hybrid vehicles making up

8 the vast majority of the fleet, as you heard during last

9 month's hydrogen fuel cell showcase.

10 AQIP investments are an important early step in

11 this transformation. We must start placing these advanced

12 vehicles on our roadways today in order to achieve

13 large-scale reductions in future decades.

14 Accordingly, we believe the Board-approved

15 guiding principles from our previous two funding plans

16 focusing AQIP on these longer-term goals continue to be

17 appropriate.

18 --o0o--

19 MR. PANSON: AQIP projects provide both immediate

20 emission reductions from the vehicles directly funded but

21 more importantly set the stage for greater reductions in

22 the future associated with large-scale deployment of

23 advanced technologies.

24 AQIP funds help reduce production costs through

25 increased sales and production volumes, raise consumer 14

1 awareness and acceptance so cleaner technologies become

2 mainstream choices, and accelerate technology transfer of

3 zero emission and hybrid technologies to new sectors.

4 --o0o--

5 MR. PANSON: With that broad background, I'll now

6 provide an update on the projects we funded through our

7 first two funding cycles. In each of these years, we

8 developed a funding plan based on the approximately $40

9 million appropriated in the State budget. Unfortunately,

10 as Mr. Goldstene noted, revenues into the AQIP fund have

11 been lower, coming in under $30 million in both years. As

12 a result, we've had to scale back project funding

13 following the contingency provisions that we established

14 in each plan.

15 We funded five project categories in our first

16 year, the two largest being vouchers for the purchase of

17 hybrid trucks and buses, and rebates for zero emission

18 passenger cars. We envisioned these as multi-year

19 projects. And as such, we continue funding the same

20 categories in the second year with one additional new

21 category, a pilot project for off-road hybrid equipment.

22 While at different points in implementation,

23 these projects are working as we envisioned and have

24 proven popular. You may have seen recent newspaper

25 articles reporting on the strong demand for ZEV rebates 15

1 through our Clean Vehicle Rebate Project, or CVRP. Due to

2 its popularity, we ran out of funding a month ago and we

3 have a lot of ZEV customers eagerly awaiting today's Board

4 action.

5 Our hybrid truck and bus voucher incentive

6 project or HVIP, has also been popular, getting California

7 fleets into hybrid trucks for the first time. This

8 program is acting as a strong catalyst to help the hybrid

9 truck market become self sustaining.

10 As this slide notes, the California Energy

11 Commission has directed $6 million of its AB 118 funding

12 to these two projects to help us meet consumer demand.

13 --o0o--

14 MR. PANSON: For a little more background on our

15 coordination with the Energy Commission, they receive

16 about $100 million annually under AB 118 for clean fuel

17 and vehicle projects to help meet California's climate

18 change goals.

19 There's overlap between the vehicle projects that

20 can be funded in each program, so we coordinate closely to

21 make sure our respective investments complement one

22 another.

23 I already mentioned that the Energy Commission

24 has stepped in to augment our clean vehicle rebate

25 projects. And at last month's hydrogen fuel cell 16

1 showcase, Commissioner Jim Boyd updated you on the

2 important investments the Commission is making on the

3 fueling infrastructure side. These are critical in

4 ensuring a successful California ZEV roll-out and another

5 example of our partnership on AB 118.

6 The Energy Commission has also taken the lead on

7 investing in workforce training to support the

8 technologies funded through both our programs.

9 --o0o--

10 MR. PANSON: With that overview, let's move on

11 the our proposed plan for the upcoming year.

12 --o0o--

13 MR. PANSON: I'll start by highlighting our

14 priorities for the year. The AQIP is working as we

15 envisioned, so we plan to continue directing most of this

16 year's funds to our two largest categories: Incentives

17 for the purchase of hybrid trucks and zero emission

18 vehicles.

19 Both hybrid truck and

20 technologies are at a key points where public incentives

21 can help them become mainstream choices, and there's been

22 strong demand for funding. We also propose to continue an

23 allocation for advanced technology demonstration projects.

24 These are an important part of the program because

25 successful demonstration projects can lead to new 17

1 deployment opportunities in the future. AQIP is ARB's

2 only ongoing funding source for these types of projects.

3 --o0o--

4 MR. PANSON: This slide shows our proposed

5 funding allocations for these categories, along with the

6 estimated number of vehicles that the funding levels

7 support. Note that the table shows two separate funding

8 targets. The $40 million target on the right reflects the

9 appropriation for AQIP projects in the State budget.

10 However, we are again projecting that revenues will be

11 lower than this full appropriation. We are incorporating

12 contingency provisions to address this revenue

13 uncertainty, and we will most likely be implementing a

14 smaller program.

15 The $28 million target on the left is a

16 conservative estimate of the total funding we expect based

17 on the revenues we've seen in the last two years. We will

18 initially issue solicitations for this lower funding

19 target, but will include provisions in all of our grant

20 agreements that allow us to scale up grant awards to fund

21 more vehicles if revenues allow.

22 Next, I'll describe each of these project

23 categories in a bit more detail.

24 --o0o--

25 MR. PANSON: The CVRP is designed to accelerate 18

1 the widespread commercialization of light-duty zero

2 emission vehicles and plug-in hybrid electric vehicles by

3 providing consumer incentives to partially offset their

4 higher costs. We've partnered with the California Center

5 for Sustainable Energy selected via competitive

6 solicitation in each of the last two funding cycles to

7 implement the CVRP.

8 --o0o--

9 MR. PANSON: ZEVs are the gold standard for ARB's

10 motor vehicle control program and early consumer

11 acceptance stimulated in part by the AQIP is a key to the

12 ultimate success of the ZEV program. This funding helps

13 enable technology-forcing regulations such as the advanced

14 clean car rulemaking, which you will consider later this

15 year. Last month's fuel cell showcase and the recent

16 popularity of the Leaf show that ZEV technology is

17 here and ready for deployment.

18 --o0o--

19 MR. PANSON: This slide illustrates the growing

20 demand for rebates we've seen since the start of CVRP.

21 The big jump corresponds to the launch of the Nissan Leaf.

22 Prior to that point, we mainly funded small numbers of

23 neighborhood electric vehicles, zero emission motorcycles,

24 and the commercial electric trucks. The truck incentives

25 moved over to the HVIP this past January. This growth 19

1 will continue as more models come to market.

2 The CVRP is open to plug in hybrid electric

3 vehicles and we anticipate the plug-in models will be

4 added in the upcoming funding cycle which will further

5 increase demand.

6 --o0o--

7 MR. PANSON: Our main challenge for the new

8 funding cycle is balancing this growing consumer demand

9 with our funding limitations. To address this, we're

10 proposing two changes that would allow us to greatly

11 increase the number of vehicles we could fund.

12 First, we propose tripling our funding allocation

13 from $5 million last year up to $15 million.

14 Second, we propose cutting ARB rebate amounts in

15 half. With the new rebate amounts, a full functioning ZEV

16 would qualify for a $2500 ARB rebate. This combines with

17 the $7500 federal tax credit to provide a total consumer

18 incentive of $10,000. We believe this level will still

19 provide a strong motivating incentive for consumers.

20 These two changes would allow us to fund about

21 six times as many vehicles, or almost 6,000

22 full-functioning ZEVs. We hope this carries us through

23 most of the next funding cycle, but it is hard to fully

24 project auto makers' vehicle deployment schedules and

25 consumer demand. If demand reaches our optimistic 20

1 assessments, our rebates would not make it through the

2 full funding cycle.

3 We also plan to set aside 10 percent of the funds

4 for use by dedicated car share fleets. Car shares offer a

5 unique opportunity to give large numbers of Californians

6 experience drives ZEVs.

7 --o0o--

8 MR. PANSON: Most of the comments we've received

9 on the funding plan relate to the CVRP, so I'll summarize

10 them here rather than at the end of the presentation.

11 These comments generally support the plan, but

12 some suggest targeted changes to our proposal as you will

13 hear during public testimony. The suggestions are

14 highlighted on this slide. Some have suggested retaining

15 the existing rebate levels either across the board or

16 specifically for car shares. This would mean funding

17 fewer vehicles overall.

18 Others suggest a set-aside or premium rebates for

19 California-based manufacturers. We believe there are

20 better ways through AB 118 to support California

21 manufacturing, such as the $55 million that the Energy

22 Commission is investing in in-state manufacturing

23 facilities and workforce training. We do not recommend

24 incorporating these changes at this time, as these

25 carve-outs would upset the balance we've tried to achieve 21

1 between consumer demand and our funding limitations.

2 One issue we are still working through relates to

3 a recently introduced light-duty zero emission commercial

4 delivery vehicle, currently eligible in the CVRP. The

5 CVRP is generally designed to incentive light-duty

6 passenger cars, while the HVIP handles heavy-duty

7 commercial vehicles. This has worked well to date,

8 however, a light-duty commercial falls in between

9 those programs. And staff believes shifting this vehicle

10 class from the CVRP to the HVIP would allow for a more

11 appropriate incentive level and more streamlined

12 implementation.

13 We ask the Board to delegate to the Executive

14 Officer the authority to work through this one last issue

15 and make the appropriate changes.

16 --o0o--

17 MR. PANSON: Looking beyond this year, we will

18 not be able to meet consumer demand at these incentive

19 levels when annual vehicles sales ramp up to the ten of

20 thousands. AQIP is simply not a large enough program. So

21 this will likely be the last year we try to fully match

22 available rebates to consumer demand.

23 We are, of course, fully committed to supporting

24 ZEV deployment in California, but a more targeted approach

25 or other strategies will likely be required for the CVRP 22

1 in future years. It is too early to say exactly what

2 these new approaches will be. That will be our main

3 challenge in developing next year's funding plan.

4 --o0o--

5 MR. PANSON: Let's move on to our hybrid truck

6 voucher project, the HVIP. Hybrid trucks and buses are

7 available in multiple sizes and configurations. Over 50

8 hybrid truck and zero-emission truck models are available

9 from over 13 manufacturers. It's a diverse marketplace,

10 however, the higher cost relative to non-hybrid models has

11 been a deterrent to purchase. The HVIP provides vouchers

12 for California fleets to buy down the cost of hybrid or

13 zero-emission vehicles at the dealership when placing an

14 order.

15 We've partnered with CalSTART selected via

16 competitive solicitation in each of the last two funding

17 cycles to implement the HVIP. The project's streamlined

18 approach has proven popular with California fleets,

19 vehicle dealers, and manufacturers. The HVIP is working

20 well, so we plan to continue this successful project

21 design with refinements aimed at encouraging broader

22 participation and ensuring that the reduced project

23 funding relative to past years goes further.

24 --o0o--

25 MR. PANSON: Hybrid technology has a high 23

1 potential to be self-sustaining as it gets more

2 established in the marketplace. So we envision it as a

3 key part of our long-term clean air strategy. And we see

4 advanced hybrid trucks playing an important role in our

5 vision for a more efficient lower emitting freight

6 transportation system.

7 --o0o--

8 MR. PANSON: This slide helps illustrate our

9 vision for HVIP in helping hybrid technology become

10 self-sustaining. Hybrid trucks generally cost between 30

11 to $70,000 more than non-hybrids, in part because they're

12 still produced in small volumes. By spurring the market

13 in this early stage, our investments will help drive down

14 the cost of future hybrid trucks, accelerating consumer

15 acceptance, and stimulating investments in the next

16 generation of hybrid technology.

17 When drive train production volumes increase,

18 prices should decline to the point where hybrids are

19 economical without an incentive because their higher fuel

20 economy reduces their pay back period to a more reasonable

21 time, as shown on the right-hand axis of this graph.

22 --o0o--

23 MR. PANSON: We've funded about 900 vehicles to

24 date. The majority are urban delivery trucks with

25 vouchers averaging about $28,000 per vehicle. Electric 24

1 trucks are also a part of the program, and about 170 of

2 the vouchers have gone to zero-emission trucks.

3 --o0o--

4 MR. PANSON: As I noted a moment ago, we are

5 proposing only modest refinements to the HVIP. We intend

6 to leave the base voucher amounts unchanged, but would

7 provide an extra $10,000 voucher for the first three

8 vehicles a fleet purchases each year to encourage

9 additional California fleets to take advantage of the

10 program.

11 We also proposing to increase voucher amounts for

12 hybrid school buses to encourage public school districts

13 to participate. To balance these increases and enable us

14 to reach our funding target of 500 new vehicles, we

15 propose a declining voucher scale for larger purchases.

16 --o0o--

17 MR. PANSON: Now on to the advanced technology

18 demonstration projects. We're proposing $2 million in

19 funding for this category, which matches the allocation in

20 each of the past two funding cycles. Our goal is to help

21 accelerate the next generation of advanced emission

22 reduction technologies with a focus on those within three

23 years of commercialization.

24 We are already have ten projects in progress

25 demonstrating advanced emission controls on locomotives, 25

1 marine engines, and commercial lawn and garden equipment.

2 We will start seeing results for these projects over the

3 next year and we will evaluate their success to make

4 future funding decisions.

5 Priorities for the new funding cycle include a

6 school bus demonstration project that was deferred from

7 last year and additional locomotive projects which match

8 the priorities set in ARB's 2009 locomotive technical

9 assessment report.

10 To complement the HVIP, we are proposing to fund

11 hybrid truck testing through the US Department of Energy's

12 National Renewable Energy Laboratory. This testing will

13 help better characterize duty cycles and emissions for the

14 various vocations where hybrids are most often used.

15 --o0o--

16 MR. PANSON: You may be wondering about the other

17 categories we funded in past years, so let me briefly

18 mention our plans for these before concluding.

19 Lawn and garden equipment replacement has shifted

20 to the Moyer program, so we are not proposing future AQIP

21 funding.

22 The agricultural work vehicle project is still

23 ongoing. The funds we've already allocated in previous

24 years are expected to meet demand, so we are not proposing

25 additional funding. 26

1 We are just starting our off-road hybrid

2 equipment pilot project, which is intended to encourage

3 the deployment of hybrid construction equipment in

4 California. We just selected a grantee last month, and we

5 used data from this pilot project to evaluate future

6 funding for this type of equipment. If the pilot proves

7 successful, we'd likely be back before you with a proposal

8 for a more comprehensive voucher project in future funding

9 plans.

10 We see transferring hybrid technology to the

11 off-road sector as a natural revolution for the AQIP.

12 You may remember that the Legislature directed

13 2008 AQIP funds to start a loan guarantee program to help

14 truckers impacted by the fleet rules. The loan program is

15 proceeding with financing provided for over a thousand

16 trucks and retrofits. We are adding a new direct loan

17 element this year, and we expect to see an increase in

18 loans over the next few months as the first compliance

19 dates of the rule approach.

20 --o0o--

21 MR. PANSON: To conclude, the proposed funding

22 plan builds on AQIP's successes providing continuing

23 funding sources for existing categories. This funding

24 will help zero-emission and hybrid vehicles proceed to the

25 critical juncture of becoming self-sustaining. These 27

1 advanced technologies are key to reaching our long-term

2 air quality and climate change goals. It is critical to

3 invest now because of the long time frames needed for

4 significant fleet turnover.

5 Because we are seeing strong demand and have

6 limited funding, we've had to make difficult choices

7 regarding allocations and incentive levels for each

8 category. We believe our proposal strikes the right

9 balance.

10 We recommend the Board approve the proposed

11 funding plan with the one minor revision I mentioned

12 earlier and direct staff to start releasing grants

13 solicitations to we can keep this important incentive

14 funding flowing to consumers.

15 Thank you.

16 CHAIRPERSON NICHOLS: Thank you.

17 Obviously when there's not much money, there's

18 always going to be difficulties about how to spread it.

19 Clearly, you've come up with a strong rationale for the

20 proposals that you're making.

21 Before we hear from the audience, I wonder if any

22 of the Board members have any particular questions.

23 Dee Dee.

24 BOARD MEMBER D'ADAMO: Not a question as much as

25 want to put something out there for discussion. 28

1 Yesterday, I will my staff briefing. And I've

2 always been very supportive of this program, that it sort

3 of dawned on me yesterday that maybe one region of the

4 state is being left behind with respect to participation

5 rates.

6 And I don't have the staff report, but I believe

7 there's some information contained in the staff report as

8 to where the participation rates are with the whole state.

9 And sort of what I'd like to do is have staff

10 refer to those rates and honing in on the valley.

11 MR. PANSON: Yes, I can do that. And actually,

12 there are numbers in the staff report, but the numbers

13 keep changing. The numbers I give you won't quite match

14 the staff report, because we have funded more vehicles

15 since then.

16 But for the CVRP, the majority of funds have gone

17 to our largest urban areas. About 40 percent of the

18 rebates have gone to the Bay Area, about 30 percent to the

19 South Coast, and about 20 percent in San Diego. And the

20 participation in the valley has been pretty low, at just

21 about two percent of the rebates.

22 CHAIRPERSON NICHOLS: So that would be ten based

23 on my arithmetic here. They'd be ten percent based on the

24 numbers you just gave.

25 MR. PANSON: Well, the Bay Area has seen about 40 29

1 percent; South Coast about 30 percent; 20 percent in San

2 Diego. And then in the San Joaquin Valley itself, it's

3 been pretty low, at about two percent, with the other 8

4 percent spread in the Sacramento region and other areas.

5 So it has been very low on the CVRP side.

6 There are a number of challenges, particularly in

7 getting the ZEVs into the valley.

8 Let me also just give you the statistics for the

9 HVIP, the heavy-duty truck side of things, because I think

10 things have been a little more balanced in that arena.

11 And we've seen about 50 percent of the truck vouchers go

12 to the South Coast, about just under 30 percent to the Bay

13 Area, about 10 percent to the San Joaquin Valley, and

14 about 10 percent to the other main urban areas, Sacramento

15 and San Diego.

16 BOARD MEMBER D'ADAMO: So -- and you're

17 absolutely correct. There are a number of challenges with

18 the valley. It's a large area. There's very limited

19 infrastructure. I've always supported public

20 infrastructure with using sort of a cluster approach,

21 because I think it's the best way to service the consumers

22 that have these vehicles so they have a good experience.

23 And if the vehicles are in urban areas and it makes sense

24 to have most of the public infrastructure there, but then

25 it works against what we're trying to do in the valley. 30

1 So I know that this program has a number of

2 goals, technology forcing, et cetera. And the Valley

3 isn't necessarily needed for that. But with respect to

4 increasing consumer acceptance and meeting our climate

5 change goals and air quality goals, we do need to deploy

6 these technologies in the valley.

7 So I just wanted to kind of cue it up. I don't

8 necessarily have an answer with respect to today's

9 allocation. I think staff has worked hard on this, and I

10 don't want to upset the apple cart.

11 The other thing, too, is that I don't want to

12 start a process like we had with 1B, where we had one

13 region competing against another and it turning into a

14 political debate about how the pie gets sliced up.

15 But I do think we need to be looking at this.

16 Maybe if staff could be directed when they come back for

17 next year how some program changes could be made with

18 respect to this program or incorporating some of the other

19 programs that exist, figuring out a way to get more of

20 these technologies in the Valley. Because as I'm out and

21 about, we are way behind.

22 The other thing, I know there's going to be some

23 testify about the Car Share Program. Perhaps targeting

24 something like a Car Share Program in the valley, you

25 know, based on extreme non-attainment or even South Coast. 31

1 It looks like South Coast already participates in a very

2 high rate.

3 That's about the only suggestion I have. But not

4 necessarily making any changes for today, but in general

5 to start the discussion for the next round.

6 CHAIRPERSON NICHOLS: Well, I appreciate your

7 doing it in that spirit because you're right. It's no fun

8 for any of us to get caught in the middle of a regional

9 fight within the state. And if we can avoid that, I think

10 we'd like to.

11 But I think your point about looking at this from

12 a perspective of how do we make sure that in total this

13 program is benefiting, the State is really a very smart

14 one. And we should look at it not just in terms of is

15 everybody getting to participate in having plug-in

16 vehicles or any particulate type of vehicle, but how do we

17 make sure we get a balance between pushing the technology

18 and also pushing the things that are going to be the most

19 beneficial for air quality in the short run because there

20 is no question about need there.

21 BOARD MEMBER D'ADAMO: Right. And the one thing

22 I didn't mention, which of course everybody already knows,

23 the Valley suffers from some pretty challenging

24 demographics: Highest unemployment rates, highest

25 foreclosure rates. So even if we were to somehow target 32

1 the Valley, we have to deal with that issue as well, which

2 is why I brought up something -- creative programs like

3 ride share or partnerships with public entities. Some way

4 to get those cars out there so that valley residents could

5 experience them maybe in a more limited way without

6 necessarily having ownership.

7 CHAIRPERSON NICHOLS: Well, thanks for the

8 reminder. And you know, if you're able to devote some

9 thought about how we can best proceed along those lines,

10 that would be also terrific.

11 MR. PANSON: Can I interject quickly? We do --

12 we recognize this issue even before we briefed you. And

13 we have taken steps -- we're talking with the air district

14 and we're collectively putting our heads together to look

15 at steps that we can take to try and get more of these

16 vehicles into the valley. They have some local incentives

17 available on the vehicle side. We're looking for ways to

18 make sure it's very easy for consumers to marry those up.

19 We're also talking about doing more consumer

20 outreach and trying to help them secure funding for

21 consumer outreach. And they're interested in exploring

22 what they can do to provide additional infrastructure

23 funding. So I don't want to understate the difficulty of

24 the challenge, but we are taking steps in that arena.

25 Another thing that I think is also going to 33

1 naturally help is that when the plug-in hybrids come to

2 market, they may be a little better suited for the Valley,

3 where, you know, distances are more spread out and that.

4 So I think as when the plug-ins -- as they come to market

5 more fully, that also naturally is going to help. So we

6 hear the concern and we agree with you. And we're trying

7 to take steps to address it.

8 CHAIRPERSON NICHOLS: Thank you.

9 Let's go to the public then. We'll begin with

10 Chris Abarca and James Chen and Nicholas Cole.

11 MR. ABARCA: Thank you. I'm Chris Abarca with

12 Azure Dynamics. We're here to support the staff's

13 recommendation on the revision moving -- potentially

14 moving the forward transit connect electric to the HVIP

15 program out of the CVRP program. We really are focused on

16 the commercial market. We have a commercial cargo van

17 that is able to carry a thousand pounds. Really is well

18 suited for urban delivery. And we really appreciate the

19 staff taking the time to listen to our concern and really

20 acknowledge it. And we just wanted to be here in support

21 of that. And thank you for all of your hard work.

22 CHAIRPERSON NICHOLS: Thank you.

23 James Chen.

24 MR. CHEN: Good morning, Chairperson Nichols and

25 honorable members of the Board. My name is James Chen, 34

1 and I'm the Director of Policy and Associate General

2 Counsel for Regulatory Affairs for Tesla Motors.

3 On behalf of the company, I'm pleased to provide

4 this testimony in support of the AB 118 funding plan for

5 fiscal year 2011/2012.

6 As many of you know, Tesla is a California-based

7 manufacturer of electric vehicles and electric vehicle

8 power trains. As a California company, Tesla is very

9 proud of the catalytic affect it has on the automotive

10 industry in revitalizing interest in the EV technology in

11 the EV market. As a whole, electric vehicle technology

12 has enjoyed a resurgence, with more and more electric

13 vehicle models coming onto the market.

14 That said, success of this introduction should

15 not be confused with full market success. While we have

16 done well in introducing vehicles to members of the

17 consumer market, such as the innovators and early

18 adopters, we are now facing a critical juncture where we

19 move away from these early purchasers to the early

20 majority, the first signs of a mass market. Incentive

21 programs like CVRP are vitally important to bolstering and

22 supporting this market.

23 Certainly, Tesla understands the economic

24 challenges facing California, and we support the creative

25 measures put forth by ARB staff with regards to the 35

1 funding for these budgetary reasons.

2 That said, we also should not lose focus on the

3 other goal of AB 118. And that is supporting

4 incentivizing the growth of jobs in the clean tech sector.

5 Increasing deployment will directly impact the economy in

6 a positive manner. Accordingly, Tesla recommends

7 modification that would support higher incentives for

8 vehicles produced by California manufacturers. And when

9 we talk about production by California manufacturers,

10 we're referring to vehicles that are substantially or

11 wholly produced in the state of California.

12 We believe this will recognize the valuable

13 contributions California manufacturers have made in

14 growing jobs in the economy and growth of the economy.

15 Not only will this validate the strategies from

16 manufacturers like Tesla, but will allow us to continue to

17 catalyze the industry, and secondly, support continued job

18 growth in the state. Not only job growth directly by

19 Tesla, but growth by suppliers. With the vast majority of

20 automotive suppliers east of the Mississippi having these

21 incentives validate what we're doing as a California

22 manufacturer will help bolster and support bringing those

23 suppliers into the state. Our written comments provide

24 additional detail, and we thank the Board for the

25 opportunity to provide this input. 36

1 CHAIRPERSON NICHOLS: Thank you very much.

2 BOARD MEMBER SPERLING: Can I ask one question?

3 What are your production plans for 2012?

4 MR. CHEN: For 2012, we will be producing and

5 introducing our model S, an EV sedan capable of seating

6 five adults and two children. We are ramping up the

7 production volumes of 20,000 vehicles a year. For that

8 first year, we will be producing approximately 5,000

9 vehicles.

10 BOARD MEMBER SPERLING: When do you start sales?

11 MR. CHEN: Sales -- we're taking deposits right

12 now. But as far as delivery, delivery will be in mid

13 2012.

14 BOARD MEMBER SPERLING: Thank you.

15 CHAIRPERSON NICHOLS: Good news. Thank you.

16 MR. CHEN: Thank you.

17 CHAIRPERSON NICHOLS: Okay. Nicholas Cole, Matt

18 Sloustcher, and Jamie Hall.

19 MR. COLE: Good morning. My name is Nick Cole,

20 and I'm the CEO of Car2Go North America.

21 You should have in front of you a letter of

22 support we've received from the San Diego Delegation to

23 the California Legislature for your review.

24 I'd like to thank the Air Resources Board for

25 allowing me the opportunity to discuss the benefits of an 37

1 electric vehicle car sharing programs as it relates to the

2 Clean Vehicles Rebate Program. Car2Go is here today in

3 opposition to the proposed 2011 funding plan with regard

4 to the reduced CVRP rebate amount by 50 percent for all

5 eligible vehicles, regardless of how these vehicles will

6 be used.

7 It is our position that alternatively fueled car

8 sharing has the unique ability to provide individuals of

9 all income levels access to these vehicles and achieves

10 the stated goals of the program more effectively.

11 Therefore, we are requesting today that fiscal

12 year 2010/2011 rebate levels be continued for vehicles

13 purchased for use in a car sharing program. It is the

14 intention of Car2Go to launch the most innovative program

15 and environmentally friendly form of car sharing available

16 today. It was our plan to launch North America's very

17 first fully electric car sharing program here in

18 California. When considering various locations worldwide

19 to launch this program, the rebate available through the

20 Air Resources Board played a major role in leading us to

21 chose California.

22 The unexpected cut will have a considerably

23 negative impact on our business model, which already

24 requires a large up front investment of over $20 million.

25 Car sharing at its core has a positive impact on the 38

1 communities it serves, by reducing congestion, reducing

2 emissions, complimenting existing public transit by

3 alleviating last mile concerns and is a cost effective

4 alternative to vehicle ownership.

5 Car2Go's electric vehicle car sharing model

6 further enhances the core benefits of car sharing by

7 making electric vehicles accessible to target users that

8 cannot be directly reached through rebate programs and tax

9 incentives because they cannot afford to buy an electric

10 vehicle by addressing consumer range anxiety through the

11 use of the vehicles and of course increasing the electric

12 vehicle visibility and adoption through firsthand

13 experience of the technology with 300 electric vehicles

14 shared by thousands of individuals.

15 In conclusion, today, we would like to ask the

16 Air Resources Board to recognize the efforts taken to

17 encourage and accelerate zero emission vehicle deployment

18 and technology, as well as increasing electric vehicle

19 visibility and adoption in the state of California by

20 supporting the efforts of car sharing programs.

21 In light of the extraordinary initial investment

22 needed to make the electric vehicles available to all

23 residents of a community and the direct benefits of such a

24 program as it relates to the established goals of the

25 CVRP, we respectfully ask that the current levels of 39

1 funding be maintained for car sharing programs in the

2 upcoming fiscal year.

3 CHAIRPERSON NICHOLS: Thank you.

4 I'm going to ask some questions about that, but

5 at the end after we've heard from everybody. Appreciate

6 your comments.

7 Matt Sloustcher and then Jaime Hall and John

8 Clements.

9 MR. SLOUSTCHER: Thank you, Chairman Nichols and

10 members of the Board.

11 I'm Matt Sloustcher, the Government Relations

12 Manager at CODA Automotive. I'm here primarily to voice

13 my support for both the AQIP and the Clean Vehicle Rebate

14 Project with some slight modifications I'd like to

15 recommend. I'll start with just a bit of background.

16 CODA was founded three years ago. The idea was

17 relatively simple: To build a mass-market, long-range

18 relatively affordable electric vehicle. It's been a long

19 journey for the company, but I'm excited to report that

20 we're nearing the finish line and expect to have our first

21 vehicles on the road by the end of the year.

22 Along this journey over the past two years, we've

23 more than quadrupled our head count in California. By the

24 end of 2012, we expect to double our head count again.

25 We recently just secured a new headquarter 40

1 facility in the city of Los Angeles that will help us to

2 grow to about of 600 in the city of L.A. We also are

3 building sales center across the state and are supporting

4 jobs -- indirect jobs through supplier relationships with

5 engineering partners.

6 As mentioned previously, there are many other

7 companies in California who are on similar growth

8 trajectories.

9 My point is that with the global clean vehicle

10 movement underway, California stands a lot to gain both

11 today and in the future by cultivating this industry. In

12 addition to jobs, these companies are also sending tax

13 revenue to Sacramento.

14 The Clean Vehicle Rebate Project has no doubt

15 been effective at accelerating the adoption of electric

16 vehicles and other ZEVs in the state. But the Air Board

17 has an opportunity to make the program more effective to

18 provide co-benefits, to make it a more effective job

19 creator. And the way to do this, as mentioned previously,

20 is to create a set aside or to offer a premium rebate for

21 the purchase of vehicles from California suppliers.

22 I would just add that this is supported both by

23 AB 118 itself and in California precedent with other

24 programs like the self-generation incentive program that

25 have these sorts of preferences. 41

1 To close, I'd like to thank Chairman Nichols and

2 members of the Board and staff for your diligent efforts

3 on the program. We think it's been very effective and

4 very important for cultivating industry. Thank you.

5 CHAIRPERSON NICHOLS: Thank you.

6 BOARD MEMBER SPERLING: Chairman, could I ask a

7 question?

8 CHAIRPERSON NICHOLS: Yeah.

9 BOARD MEMBER SPERLING: We're going to talk about

10 this some more, I presume. But just as a factual thing, I

11 mean, most of us are very strongly supportive of CODA and

12 companies -- EV companies in California. But what percent

13 of the content of a CODA car is California?

14 MR. SLOUSTCHER: I don't have specific numbers

15 for California. In terms of --

16 BOARD MEMBER SPERLING: For U.S.

17 MR. SLOUSTCHER: It's 30 to 40 percent I believe.

18 BOARD MEMBER SPERLING: For U.S.?

19 MR. SLOUSTCHER: Correct. And the cars will be

20 final assembled in California.

21 BOARD MEMBER SPERLING: They're Chinese

22 batteries?

23 MR. SLOUSTCHER: Correct.

24 CHAIRPERSON NICHOLS: Thank you.

25 Jaime Hall from Calstart and John Clements and 42

1 Mark Geller.

2 MR. HALL: Good morning, Chairman Nichols and

3 members of the Board.

4 My name is Jaime Hall. I'm Policy Director for

5 Calstart.

6 I want to speak in favor of the AQIP plan overall

7 as proposed by staff. And I want to talk on HVIP in

8 particular, the hybrid truck and bus voucher incentive

9 project.

10 This program is really exactly what fleets and

11 manufacturers need in order to move the industry forward

12 and to get these vehicles on the road. It's streamlined

13 and simple, making it unlike many government programs. It

14 reduces costs right at the point of purchase, which is a

15 lot easier than the tax credit or something like that

16 where companies need to put up money up front and sort of

17 get repaid later.

18 And the Board and staff have signaled a

19 multi-year commitment to this. It's a stable program and

20 provides long-term signals the industry needs in order to

21 keep moving ahead in this area.

22 It's been very successful so far. The first year

23 sold out in record time. This is because of a lot of

24 pent-up demand. All the money went out quickly, and we

25 got 100 trucks on the road in a matter of months. 43

1 It was responsible for more than a third of the

2 national sales last year of hybrid trucks, which really

3 means this program is driving the market nationwide. It

4 won an award from ACEEE as a really innovative and

5 effective program for energy efficiency. We conducted a

6 study funded by the Energy Foundation that identified it

7 as one of the best incentive structures and something that

8 people would really like to see copied elsewhere in other

9 states and around the county.

10 We're starting to see interest in that. New York

11 is looking at maybe doing something along these lines and

12 we know some federal agencies have been speaking with

13 staff about how they could do something like this at the

14 federal level. This is exactly what industry would like

15 to see, what we would like to see, and it's really

16 evidence of the fact this is a good program.

17 It will continue to be important in the future.

18 The pace has slowed down a bit from last year because

19 there's not so much pent-up demand anymore, but we've been

20 polling companies and see strong and steady demand for

21 purchases throughout the next year or two. We are talking

22 to large fleets who are planning significant purchases in

23 the future. We're working with municipalities and next

24 level fleets in trying to get these things beyond the

25 early adopters. 44

1 And it's important to know there are no federal

2 incentives for this sector. HVIP is really the only game

3 in town. This is what's getting hybrid trucks on the

4 road. It's the most important program out there for

5 really advanced, medium, and heavy-duty vehicles.

6 We've been a key AB 118 supporter. We definitely

7 agree CARB has got a difficult job given budget

8 constraints and sort of all the demands to pull money in

9 different directions. We think you've struck the right

10 balance. It's a difficult job. We think these innovative

11 programs are really setting a clear market signal. And we

12 encourage you to keep the HVIP program around and think

13 you've done a great job making difficult choices here.

14 CHAIRPERSON NICHOLS: Thank you.

15 MR. HALL: I beat the buzzer.

16 CHAIRPERSON NICHOLS: You did. Okay.

17 John Clements and then Mark Geller and Jay

18 Friedland.

19 MR. CLEMENTS: Good morning, Madam Chair and

20 members of the Board. Thanks for the opportunity to share

21 today.

22 I'm an end user. I'm John Clements, Kings Canyon

23 Unified School District Transportation Director. I am

24 from the Central Valley.

25 And I'm here to tell you that this year we're 45

1 going to use HVIP funds in combination with lower emission

2 school bus funds, in combination with AB 939 funds, in

3 combination with our Measure C Fresno County

4 Transportation Authority road tax dollars to fully fund

5 two charge sustainable hybrid electric -- oh, I forgot.

6 And because I participated with Joe Calivita and Lucina's

7 working group for HVIP and there was a connection made, I

8 got a call from a lady over at Sac AQMD by the name of

9 Fria Eric that says, by the way, I have some hybrid moneys

10 that I need help spending. And so those two buses that I

11 will receive before Christmas will be fully funded, thanks

12 to the connections I've made here in this building.

13 Now, that's the first two. But we're going to go

14 with three more that we received about 635,000 through

15 CMAC in partnership with our local Fresno County Council

16 of Governments and Caltrans and Federal Highway

17 Administration that provides those dollars. But we've

18 come up a little short. And so those are going to be

19 delivered in 2012. Through the incentives that are

20 available for school bus in 2012, those three buses I'm

21 going to obtain, two more charge sustaining models and

22 we're going to go ahead and step out even though the

23 plug-in model through our manufacturer has not been

24 approved yet at this building because the manufacturer

25 hasn't gone through the approval process, we're going to 46

1 seek a plug-in charge depleting hybrid electric school bus

2 as our fifth one.

3 And I believe that when it's all said and done,

4 we'll probably have to come up with about 12- to 13,000 of

5 our own dollars, which is a small price to pay for well

6 over in excess of a million, million-and-a-half in school

7 buses.

8 CHAIRPERSON NICHOLS: That's a fabulous story.

9 MR. CLEMENTS: So thanks for those dollars. Keep

10 the dollars coming.

11 Our local paper did misquote Calstart, and I

12 believe the electronic version is correct. It said there

13 weren't any more dollars left for HVIP this year. We know

14 that's not correct. I'm counting on those dollars. I

15 have a copy for you. And I have a copy for our Valley

16 Board person that I'd like to leave with staff.

17 Also inside there are two pictures. One is of an

18 all-. We love Kings Canyon Unified and our

19 Central Valley Transportation Center, of which we are a

20 JPA member with our local city and our local community

21 college. We love to demonstrate this for food service

22 delivery throughout our local school district region, and

23 one of these, which is an all-electric school bus yet to

24 come. Thank you.

25 CHAIRPERSON NICHOLS: Well, I'm thrilled to hear 47

1 that you've been able to piece all these different bits of

2 money together. It's an awesome task to just ferret out

3 all those funds.

4 MR. CLEMENTS: I can stand here and tell you

5 more. We're going to get seven diesel school buses with a

6 number of other funds, including your lower emission

7 school bus funds. So next year, we're going to get twelve

8 new school buses, you know. And of course, we still have

9 17 that we need to get rid of to meet that 2018 deadline.

10 We're plugging away. And thank you for those funds. Keep

11 them coming.

12 CHAIRPERSON NICHOLS: I'm sure the kids who

13 breathe cleaner air in those buses are also --

14 MR. CLEMENTS: I'm excited. We hope to plug that

15 one hybrid into solar-covered carports during the day.

16 CHAIRPERSON NICHOLS: Great. Thank you.

17 Mark Geller.

18 MR. GELLER: Hello. Mark Geller from Plug-In

19 America.

20 I'm very pleased to be here to support the staff

21 recommendation on CRVP, the use of the 118 funds. It's

22 very clear that commercialization of zero emission

23 vehicles, particularly passenger vehicles, is going to be

24 critical to achieving the goals the State has set out.

25 Consumers are the linchpin. Thousands of cars are now -- 48

1 plug-in cars are now being delivered to consumers in

2 California.

3 We support the lowering of the rebate level in

4 order to reach more consumers in order to enable more

5 folks to get vehicles. It's not a surprise to Plug-In

6 America that plug-in cars have the kind of demand we're

7 seeing in the marketplace.

8 It's clear from the presentation earlier that the

9 demand this past funding year outstripped the supply of

10 vehicles. And it is close to anticipated that that will

11 be the case again next year.

12 We hope that the Board through 118 funding and

13 other measures finds ways to continue to support

14 consumers' attempts to get plug-in vehicles in California.

15 The benefit of plug-in vehicles in terms of air

16 quality and petroleum reduction is perhaps unsurpassed by

17 any other effort of this Board. And we hope they will

18 continue. You will continue to make all the efforts to

19 make sure consumers are able to get plug-in vehicles in

20 California with the support of the State and the federal

21 government.

22 Thank you very much.

23 CHAIRPERSON NICHOLS: Thank you.

24 Jay Friedland, followed by Mel Assagai and

25 Michael Bennett. 49

1 MR. FRIEDLAND: Good morning, Chairman Nichols

2 and Board of the members. I'm actually here in a slightly

3 different role than usual. My colleague, Mark Geller,

4 spoke for Plug-In America. I'm here speaking on behalf of

5 Zero Motorcycles, which I'm the BPA of strategy and

6 sustainability.

7 I really want to take an opportunity to thank the

8 Board and the staff for all the hard work they've done on

9 the Clean Vehicle Rebate Program. It's a really

10 outstanding and successful program.

11 For a small company like Zero, the consumer

12 incentives help both consumers and manufacturers. And I

13 think that's one of the things that we really want to get

14 across in that it's very highly leveraged. The consumers

15 that benefit and the manufacturers benefit.

16 The Zero sales team estimates there was probably

17 between a 30 to 50 percent increase in sales in California

18 based on the fact that the rebate was available for our

19 zero emission motorcycle. And to give you a feeling, it's

20 a $10,000 motorcycle. There is a $1,000 federal tax

21 credit, and there was the $1500. So put it at 7500, which

22 was very significant from a consumer standpoint.

23 At several of the other manufacturers have

24 mentioned, one of the key goals written into AB 118 was to

25 encourage California manufacturing of EVs and have EV 50

1 components and really to enhance the California's green

2 economy and green jobs in California. So Zero is joining

3 together today with Tesla and CODA and Vantage and other

4 California manufacturers to request your consideration of

5 the proposal, which has two components to it. One is an

6 enhanced rebate level for California manufacturers. And

7 secondly, set-asides similar to the car share set-aside

8 for plug-ins that are manufactured in California.

9 To give you a feeling, Zero has grown from five

10 employees in 2008 to now 60 employees today. This is in

11 California. Last year, we moved our manufacturing. We

12 originally started out manufacturing in Asia, and we moved

13 our manufacturing back to the U.S., back to Scotts Valley

14 and Santa Cruz. And we want to grow this further.

15 To answer Dr. Sperling's question in advance, we

16 have over 50 percent U.S. content and have qualified for

17 export funding under the U.S. export/inport bank as well.

18 So we really would like to look at the original goals of

19 AB 118 and the envisioned ideas and look at preferences

20 that will further help the California economy and

21 manufacturers in that space.

22 CHAIRPERSON NICHOLS: Thanks.

23 Mel Assagai followed by Michael Bennett and then

24 bone Bonnie Holmes-Gen.

25 MR. ASSAGAI: Good morning, Madam Chair and 51

1 members. How are you this morning?

2 I'm Mel Assagai for Navistar. As you know,

3 Navistar has been partners with the Air Resources Board in

4 the climate change efforts from the very start. We

5 manufacture hybrid electric school bus. We manufacture

6 hybrid trucks. Even have an all-electric vehicle that's

7 for sale in California, all ARB certified.

8 We want to thank the staff for this excellent

9 recommendation. We know this is a very challenging fiscal

10 time and there are hard choices to be made. We're glad

11 the Board is sticking with its commitment to the AQIP and

12 the HVIP. We think the HVIP is a very sensible program.

13 The voucher program is a very superior way of getting

14 these vehicles to market.

15 We want you to stay the course and understand

16 that the last year or so won't be typical of what's going

17 on in the future. We expect demand for these vehicles to

18 increase. We're planning on it and we hope that we can

19 continue to support you in your efforts. Thank you very

20 much.

21 CHAIRPERSON NICHOLS: Thank you.

22 Mr. Bennett.

23 BOARD MEMBER SPERLING: Could I ask a question?

24 CHAIRPERSON NICHOLS: Sorry.

25 BOARD MEMBER SPERLING: So this is wonderful that 52

1 Navistar has been interested in hybrid vehicles. Can you

2 give us a better -- given that Navistar is one of the

3 largest truck manufacturers, can you give us a sense of

4 how important or what hybrid vehicles are, some sense

5 of -- I guess my real question is: How much impact is our

6 program really having in terms of simulating investment on

7 your part?

8 MR. ASSAGAI: Your programming really is at the

9 heart of innovation in this area. We recognize that

10 California leads the way in this area. So a lot of the

11 innovation that we've engaged in over the years has been

12 driven by the ARB's priorities and what it set out in

13 terms of incentivizing these things. It really is maybe

14 the most important element in driving innovation at

15 Navistar. We look at California as a proving ground, as a

16 starting place, and someplace we expect the market to

17 grow. It's very, very important. And that's why we're

18 here to support the program today.

19 BOARD MEMBER SPERLING: Thank you.

20 MR. ASSAGAI: You're very welcome.

21 CHAIRPERSON NICHOLS: Thank you very much. I

22 understand that Mr. Bennett did not attend today. I guess

23 he signed up online and then decided not to. So Bonnie

24 Holmes-Gen.

25 MS. HOLMES-GEN: Good morning, Chair Nichols and 53

1 Board members. Bonnie Holmes-Gen with the American Lung

2 Association of California.

3 And I wanted to tell you again that the American

4 Lung Association of California strongly supports the AB

5 118 program and believes this funding, ARB AQIP together

6 with the 188 funding is an extremely important component

7 of California's efforts to jump start the market for the

8 cleanest and lowest carbon transportation technologies.

9 And we're very pleased with the growing list of

10 accomplishments of this program. And I've been really

11 pleased to be participating with the CEC 118 Money

12 Advisory Committee also and seeing both sides of this. We

13 hope that you can find more ways to publicize the

14 accomplishments and get the word out there.

15 I did want to highlight that we agree with the

16 point raised by Board Member D'Adamo and discussing

17 earlier and just comment that the history of this

18 particular pot of funding has been both to promote

19 advanced technology and to assist the air districts with

20 their attainment challenges, especially in these tough

21 areas. This funding can greatly assist in meeting federal

22 air quality standards.

23 And we certainly would support more focus and

24 discussion on how we can get more dollars and assistance

25 from this program and some of the worst polluted areas, of 54

1 course, the San Joaquin Valley and looking for ways that

2 we can increase consumer experience with zero emission

3 vehicles in the valley is very important.

4 But overall, we're here to support the staff

5 proposal. We appreciate the hard work of the staff in

6 devising ways to more efficiently spend these funds.

7 We're excited to see the growth and interest for the ZEV

8 consumer rebates or ZEV consumer incentives. And we think

9 this is exciting and really just incredibly important to

10 California's zero emission vehicle program.

11 So thank you and keep moving forward.

12 CHAIRPERSON NICHOLS: Thank you. And thanks for

13 all your support in this obtaining this fund in the first

14 place. So we appreciate that very much.

15 That is the last of witnesses who had signed up

16 to speak. So it's now time for some discussion.

17 I guess I have a couple of questions and other

18 Board members may, too. But there were two distinct

19 points that I heard that I think the staff should address

20 in a little bit more detail. The first was the issue

21 about whether there should be either a set-aside or some

22 form of special incentive for people who purchase electric

23 vehicles for car sharing programs versus for an individual

24 consumer. Obviously, a sharing program can reach a larger

25 number of people, larger number of households. And I'm 55

1 aware of the fact that these are increasingly popular

2 programs on college campuses and they tend to appeal to

3 younger consumers who at least generally are also less

4 affluent. So I'm curious if there's been any thought

5 about how to add any additional incentive there.

6 MR. PANSON: Well, we do recognize the value of

7 car share programs and we're trying to encourage them. I

8 think that's the whole genesis for us to take this step

9 and make the proposal to set aside ten percent of the

10 funds to ensure there is participation by car share

11 fleets.

12 We think that that -- we run through the analysis

13 and we believe that's the appropriate level of support in

14 this kind of challenging time.

15 As you've heard, we're up against a numbers game.

16 We have a limited amount of money. If we provide more per

17 vehicle incentives, it means fewer vehicles funded

18 overall. We're going to really struggle to meet demand

19 through the course of the year. If we do premium rebates

20 and bump ups, it means we are going to fall even further

21 short. We're in a tough and challenging situation.

22 CHAIRPERSON NICHOLS: A set-aside is a value and

23 especially if it's communicated to those who are

24 interested. That certainly is a valuable thing.

25 I guess somewhat related though -- it's not 56

1 exactly the same point. It wasn't brought up here. With

2 respect to people who purchased vehicles when there wasn't

3 any incentive money available, how are you planning on

4 dealing with those?

5 MR. PANSON: We actually anticipated that and

6 included provisions in the plan that you approved last

7 year. And we have a waiting list. And we've publicized

8 that so we're still taking people on the waiting list. I

9 think there's about 500 consumers on the waiting list.

10 But in setting up the waiting list, there is a

11 couple caveats that go with it. One, it's subject to the

12 Board approving and the Legislature making money

13 available. And two, we were going to -- the rebate levels

14 were going to be at the level that's approved for the

15 upcoming year.

16 CHAIRPERSON NICHOLS: The new going forward

17 level.

18 MR. PANSON: We're very clear about that on the

19 website. So those on the waiting list will get a rebate.

20 But if the Board approves our proposal, it's going to be a

21 $2500 instead of a $5,000 rebate.

22 Again, it's a matter of trying to stretch our

23 dollars as far as possible. And we were very clear and

24 transparent and up front to our consumers that when they

25 went on that waiting list they would be eligible for 57

1 whatever the new incentive level was. At the time that we

2 started taking people on the waiting list, we had

3 workshops. Our proposed was very well flushed out. I

4 think people knew it was going to be $2500.

5 CHAIRPERSON NICHOLS: Okay. And then I probably

6 somewhat more significant in big policy sense at least is

7 the issue about what kind of recognition should be given

8 to people who do manufacture within the state of

9 California. I'm sure you've given thought to this before.

10 I'd like to hear a little bit more about your rationale

11 and also question in terms of the timing of these funds

12 because of the fact that both of the firms that appear

13 today that are manufacturing in California of cars --

14 well, actually, all of them are California firms. But

15 they're all talking about the future. The cars aren't

16 here right now. So even if they're taking orders, they're

17 still not in a position to actually take advantage of

18 those incentive funds as I understand it.

19 So as Ms. Berg was suggesting to me a little bit

20 earlier today, we might want to do something just in terms

21 of reserving funds so hypothetically we don't use up all

22 the incentive funds at the beginning of year before people

23 who are here making them can make advantage of them.

24 Anyway, could you address that issue?

25 MR. PANSON: Yeah. It's definitely a challenging 58

1 issue. And AB 118 does and is actively supporting

2 in-state manufacturing. And AB 118 is more than just our

3 program. And I want to make sure we don't lose sight of

4 the fact that the Energy Commission is investing $55

5 million in in-state manufacturing plants and workforce

6 training to better train the California job force. So

7 that is --

8 CHAIRPERSON NICHOLS: This is specifically tied

9 to advanced vehicles?

10 MR. PANSON: Yes. It's part of their -- it's

11 through AB 118. So on the manufacturing, it's for design

12 and production capacity for advanced vehicles, electric

13 and hybrid vehicles, batteries, vehicle components. So

14 this isn't part of a larger pot that's going to all kinds

15 of different industries. This is for the vehicle industry

16 and the workforce training. By the same token, it's very

17 much intended to marry up with the technologies that we're

18 funding. So --

19 CHAIRPERSON NICHOLS: So it's important to

20 recognize this isn't the only pot of funding out there

21 that's available.

22 MR. PANSON: Yes.

23 And by doing the issue with the premium rebates

24 for California companies, again, it's the same issue that

25 we're talking about relative to car shares that is -- if 59

1 we give more higher rebate levels per vehicle, we're going

2 to fund fewer vehicles overall.

3 CHAIRPERSON NICHOLS: What about the issue of

4 setting aside some of the funding or at least not paying

5 it all out at the beginning?

6 MR. PANSON: That also presents some challenges

7 because what we're going to do is turn away some consumers

8 saying you're ready to buy a vehicle today and we're not

9 going to -- we've run out of money. If we are doing a

10 set-aside, we're taking it away from the general pot. So

11 we potentially will be telling consumers who are ready to

12 make a purchasing decision today or some months from now

13 that they can't take advantage, because we're holding

14 money aside for vehicles that actually are in active

15 production right now. That's presents a challenge.

16 CHAIRPERSON NICHOLS: Any other thoughts or

17 questions?

18 Yes, Dr. Sperling.

19 BOARD MEMBER SPERLING: I have a lot of

20 questions, you know, along the same lines. I guess I

21 don't fully understand how these are being set up. You

22 know, for instance, the car share. So I guess I'm not

23 even clear what's in the resolution.

24 CHAIRPERSON NICHOLS: How it works.

25 BOARD MEMBER SPERLING: How all this works. I 60

1 was testing out zero emission bicycles in France until

2 yesterday. So I didn't get a chance to catch up here.

3 CHAIRPERSON NICHOLS: Our hearts go out to you.

4 BOARD MEMBER SPERLING: So I request a little

5 sympathy here and patience.

6 So with the car share, for instance, if there is

7 a ten percent -- so I guess you're proposing -- it's in

8 the recommendation for the ten percent for car share. So

9 they get ten percent carve-out. And that means that ten

10 percent is set aside for the entire -- it's there for the

11 entire year, unless it's not used but then -- and it's the

12 same amount. It's the same $2500 per car amount?

13 MR. PANSON: Yes.

14 BOARD MEMBER SPERLING: And so if it's not used

15 at the end of the year --

16 MR. PANSON: If it's not used, it would flow back

17 into the general -- it's available for any consumer to

18 take advantage of. It will be spent on ZEV rebates. It

19 won't go back into the more general AQIP pot. It's going

20 to stay in the CVRP to incentivize consumer light-duty ZEV

21 rebates, but the car shares will have the first go at the

22 money.

23 BOARD MEMBER SPERLING: Since these are

24 business -- I know I definitely -- I've been a champion of

25 car sharing since the beginning. And so I'm very 61

1 supportive.

2 But in terms of making this work for -- if it's a

3 company that comes in, what happens if they fold up shop

4 six months later?

5 MR. PANSON: Yeah. That's actually a good

6 question.

7 Anyone who takes advantage of our rebate funding

8 is committing to keep a vehicle in California for three

9 years. When they sign on the dotted line to get our

10 money, they're making that commitment and agreeing to --

11 if they don't stay in California for the full three years,

12 they have to either, if they re-sell the vehicle, pass on

13 the pro-rated amount of the rebate to whoever is

14 purchasing the vehicle or return the money to the program.

15 BOARD MEMBER SPERLING: And one more thing on the

16 car sharing part. Are there any other companies that have

17 indicated interest in this program other than Mercedes?

18 MR. PANSON: Yes. There are a number of rental

19 car agencies are kind of exploring and in the process of

20 setting up car share elements to that business and have

21 come and talked to us expressed interest, expressed

22 support for the set-aside. So Car2Go, the people who

23 testified today, have kind of been the most active or the

24 most out in front. But there are other entities that are

25 interested in looking forward to and hoping to take 62

1 advantage of this funding.

2 BOARD MEMBER SPERLING: I could have some more

3 questions, but I think you were -- so another question is

4 this $2500, why not make it a thousand? Is there any

5 logic or rationale behind these numbers?

6 MR. PANSON: Yes.

7 CHAIRPERSON NICHOLS: It's not arbitrary and

8 capricious. Let me tell you that. It's based on a

9 strong --

10 BOARD MEMBER SPERLING: Lots of research.

11 CHAIRPERSON NICHOLS: Yes.

12 MR. PANSON: You know, eventually we're going to

13 continue to either reduce rebate levels or as I said next

14 year we're going to have to do something more targeted.

15 We've been funding 5,000 -- there's $5,000 had been the

16 target -- had been the number that's been out there for a

17 number of years. We realize we're not only seeing more

18 demand, we knew that we could lower the number. And we

19 really just want to take a stair-step approach.

20 I can tell you when we proposed at our April

21 round of workshops $2500, we actually got a fair amount of

22 push-back on that that they were going too far, too fast.

23 At the time we were doing that, there was still several

24 million dollars left in our pot. And I think the comments

25 that we're going too far, too fast, maybe had a little 63

1 more relevance at that time. Since that time, we've seen

2 an upsurge in demand, and we think we've hit the right

3 number.

4 BOARD MEMBER SPERLING: So the expectation is

5 we'll probably go down to a lower number next year.

6 MR. PANSON: Next year, the CVRP is likely going

7 to look very different, because we definitely will not be

8 able to meet this paradigm of everyone gets a rebate.

9 We'd likely have to go down to a number that's so low that

10 it doesn't serve as a motivating incentive anymore. And

11 what's the point of giving an incentive that doesn't

12 actually incent.

13 So, yes, you know, it's going to look very

14 different next year as soon as we catch our breath and

15 finish this year's funding plan and get this list out and

16 get funding out, we're going to immediately start thinking

17 about how we are going to revamp and redesign or move this

18 program forward. So it's going to be different next year.

19 But that's just a preview of coming attractions.

20 BOARD MEMBER SPERLING: Okay. And the amount --

21 following up on Chairman Nichols' question, these people

22 that are on the wait list, I guess I didn't understand

23 what that means. Is that because there is a lot of -- by

24 the end of this year, there's going to be an awful lot of

25 them on it. It seems like that will use up all of the 64

1 money from next year before we even get to next year. Am

2 I misunderstanding?

3 MR. PANSON: By next year, you mean the

4 money you're approving right now?

5 BOARD MEMBER SPERLING: Yeah.

6 MR. PANSON: We actually -- we realize -- we want

7 to take care of people on the wait list as quickly as

8 possible. Normally, the way we've been running this

9 program is we -- the Board adopts the plan. We then

10 develop and issue solicitations and make new funding

11 available kind of around the first of next year. We

12 realize that would be untenable given the fact we've run

13 out of money. So we actually have a solicitation fully

14 ready to go pending Board approval. And we hope to

15 release it as early as next week. It will be out for

16 30 days. And we hope to turn it around and sign a new

17 grant agreement to get the money back out to consumers as

18 early as hopefully mid September.

19 We're going to start to satisfy the waiting list

20 hopefully 45 days to 60 days from now. Right now, there's

21 500 consumers on that waiting list. So it is going to

22 take up some of this year's funding. But we hope to have

23 the funding flowing before the waiting list gets too much

24 higher.

25 BOARD MEMBER SPERLING: So you're saying you're 65

1 not allowing anyone else on the waiting list?

2 MR. PANSON: No. We continue to allow people.

3 We hope to have the money actively flowing in 45 to 60

4 days from now. There won't be a waiting list after that.

5 The money is going to go -- the program is going to be

6 live.

7 CHAIRPERSON NICHOLS: Back in real time.

8 Yes, DeeDee.

9 BOARD MEMBER D'ADAMO: I'd like to chat a bit

10 about this issue of the sweet spot and what it takes for

11 the Car Share Program. I don't know what that amount is,

12 but I guess, you know, of course, Car2Go is interested in

13 higher amount. Anybody would be.

14 But I'd like to hear your thoughts about at what

15 point is it not enough of an incentive such that it

16 wouldn't make a business case and it wouldn't end up

17 implementing the program. I don't know if you spent much

18 time with Car2Go and exactly what it would take. I think

19 there needs to be some way to include in the analysis that

20 we're getting more from those cars than we would a car

21 that is in the hands of the consumer.

22 Do you have any information about how many people

23 would cycle through a car share program?

24 And of course the other thing, too, is the big

25 splash that can't quite put a price tag on that. But the 66

1 big splash that a car share program would have as opposed

2 to an individual consumer or even at a rental agency where

3 maybe they have a few electric cars as opposed to a whole

4 program where there is a marketing scheme that goes with

5 it.

6 MR. PANSON: You know, we believe the program is

7 still going to go forward even at this incentive level.

8 Perhaps, you're -- some of the questions you're asking me

9 are questions that I think the car share entities should

10 answer. And I'm not going to try to answer for them.

11 But you know, we think we're at the right funding

12 level. And again if we provide higher rebates -- levels

13 for these, it means other people aren't getting taken care

14 of. So it's a hard trade-off to make.

15 BOARD MEMBER D'ADAMO: Maybe we should pull them

16 up here. I'd like to know and also --

17 BOARD MEMBER RIORDAN: I will -- if the gentleman

18 would like to come forward to respond to her very specific

19 question. I don't think we want to reopen a lot of

20 testimony.

21 BOARD MEMBER D'ADAMO: My co-counsel here is

22 nudging me for more questions. What I was going to say

23 also do you have information on how much individuals cycle

24 through those cars over a year or some period of time?

25 MR. COLE: I'll use Austin was our first launch 67

1 in North America. Those are combustion engines obviously.

2 We have 15,000 members in Austin. We see generally during

3 the course of a seven-day calendar week 4,000 rentals. So

4 each car is being utilized several times a day, if not

5 more.

6 And our membership, like I said, it is 15,000

7 people. And I would tell you based on the folks that --

8 we're just starting to do our internal studies on who's

9 using the car. But I would imagine based on who we know

10 are using the cars in Austin, for instance, they probably

11 wouldn't be in the market or able to purchase an EV like

12 this project would bring to the city.

13 BOARD MEMBER D'ADAMO: A question about the

14 business model on the 25 versus.

15 MR. COLE: The business model --

16 BOARD MEMBER D'ADAMO: At what point do you have

17 to walk away from it?

18 MR. COLE: It's a consideration, to be honest

19 with you. It's a significant investment, as I said.

20 We're looking at over $20 million to launch this program

21 in California. And so we did, we took the CVRP into

22 consideration. We built the business model. And of

23 course, the federal tax incentives as well.

24 BOARD MEMBER D'ADAMO: Just a follow-up for

25 staff. 68

1 Were car share programs and rental car agencies

2 treated the same with respect to that ten percent?

3 MR. PANSON: The ten percent is only for

4 dedicated car share fleets. Some rental car agencies are

5 interested in considering setting up car share programs.

6 So if a rental car agency sets up a car share fleet, a car

7 share program, yes, they would be eligible for the

8 set-aside. It's not a set-aside for rental car -- just

9 the normal rental car business model.

10 I guess one other point I also want to make is

11 that our incentive is part of the package that the car

12 share entities are going to be able to take advantage of.

13 I believe they're also eligible for the federal tax

14 credit, meaning they're getting the $7500 per year that's

15 coming to San Diego. And the reason they're coming to San

16 Diego is because of the tremendous infrastructure

17 investment that's been made in that region.

18 So, you know, our rebate in and of itself is not

19 the only thing that's drawing this car share program to

20 San Diego. So it's important to acknowledge that there's

21 other things that are feeding into this.

22 BOARD MEMBER D'ADAMO: The other question that I

23 have is that -- and I don't know enough about the car

24 share program and when it's planning on deploying the

25 cars. But if time runs out, I think that there should be 69

1 the discretion to allow those funds to be used for the car

2 share program if they're not used by the end of the

3 calendar year, rather than it going back into the general

4 pot. Do you have that discretion?

5 MR. PANSON: Yes. That level of sort of

6 implementation detail we -- the specific dates and that,

7 we establish in our implementation manuals for these

8 programs. If you want to give us some guidance or

9 direction on exactly how long we should leave the money

10 available for the car share fleets, we welcome that.

11 CHAIRPERSON NICHOLS: Supervisor Roberts.

12 BOARD MEMBER ROBERTS: I wanted to ask a couple

13 questions. I want to go back to some basic math and maybe

14 it will help us a little bit. We've got ten percent of

15 which number?

16 MR. PANSON: It's ten percent of the $15 million

17 that we're proposing for the CVRP. It's about $1.5

18 million set-aside.

19 BOARD MEMBER ROBERTS: So 1.5 help me. How many

20 cars is that going to be?

21 MR. PANSON: We can funds about 700 vehicles.

22 BOARD MEMBER ROBERTS: Seven-hundred. Put into

23 perspective, how many of these programs we have around the

24 state, that's a lot of cars. So it seems like there's

25 going to be adequate funding in here. 70

1 Do we have -- have you had contacts with enough

2 people to feel comfortable that we're going to go through

3 anywhere close to that in terms of new businesses?

4 MR. PANSON: You know, the other entities we've

5 talked to -- you know, the number of vehicles that they're

6 interested in would approach the full funding that we're

7 talking about when you look at Car2Go as well as the other

8 entities we're talking about. We think the demand could

9 be potentially in that 700 vehicle range.

10 BOARD MEMBER ROBERTS: That's really the

11 questions I was trying to get at. If we're matching the

12 program to the likely demand or if we are setting

13 something up and we're going to have a bunch of money left

14 over and we going to try to figure out what to do with it.

15 MR. PANSON: And the reason why we have the

16 provision for the money to flow back into the CVRP general

17 pot of money is that we're trying to meet multiple goals

18 here. We're trying to meet the funding target of 5600

19 full-functioning ZEVs is what we could fund with the $15

20 million allocation. So we'd like to see some fraction of

21 them up to 700 be in car share applications.

22 But if there wasn't a full demand for funding for

23 car shares, that money would go back into the general CVRP

24 pot, which would get us to our 5600 vehicle target. So I

25 think I see maybe the math that you're thinking about. If 71

1 we didn't think we're going to use all $1.5 million, we

2 could bump up the per-vehicle rebate amount to satisfy the

3 300 vehicles that they're talking about here.

4 By doing that, we're going to not meet our 5600

5 vehicle target. We're already telling you we think we're

6 not going to make it through the full funding year. So

7 when we do set-asides and we may choose to want to do a

8 bump up, but it means we're not -- going to end up further

9 behind in trying to meet the consumer demand.

10 BOARD MEMBER ROBERTS: Help me with the math 1.5

11 million divided by 2.5?

12 MR. PANSON: Yeah.

13 BOARD MEMBER ROBERTS: You're getting 700?

14 MR. PANSON: Yeah. There's some administrative

15 costs. So, you know, when we say 700, it reflects the

16 fact there is some administrative overhead.

17 BOARD MEMBER ROBERTS: Help me to understand also

18 what is the difference between what makes something car

19 sharing as opposed to car rental all or whatever your

20 other category is? You've talked about it and we've

21 thrown it around. It's not clear to me what the

22 distinction is.

23 BRANCH CHIEF BEVAN: Analisa Bevan with the

24 Sustainable Transportation Technology Branch.

25 We've defined car sharing programs within the 72

1 Zero Emission Vehicle Program to have intelligence

2 reservation systems to use shared use subscription

3 services. It is a more technologically advanced system

4 than a rental car program. It's not intended for

5 incidental use, but more regular use. And also often is

6 linked to transit. And we actually have provisions within

7 the zero emission vehicle regulation which provide

8 additional zero emission vehicle credit for such

9 applications for zero emission vehicles.

10 And I actually wanted to add that to this

11 discussion that ZEVs and plug-in hybrids which fall under

12 the zero emission vehicle regulation and are used in

13 shared car applications can earn as much as three times

14 more ZEV credit than they would if they were purchased or

15 used by a consumer. So that's an additional significant

16 incentive to put cars into car share applications.

17 BOARD MEMBER ROBERTS: I'm trying to understand

18 the business distinction between what we're setting -- I

19 mean, what would Hertz have to do to get into this

20 business?

21 BRANCH CHIEF BEVAN: They can get into the

22 business. There is a distinction between business where

23 they have a subscription contract with the user who always

24 comes back to that car and may use an online or smart

25 phone application to reserve that car or those kinds of 73

1 cars on a regular basis versus the incidental user who

2 walks into the rental agency and chooses to rental that

3 car or any other technology of car. If they've got a

4 subscription service and an intelligent reservation

5 system, then it's a shared car application.

6 CHAIRPERSON NICHOLS: The people seem to use them

7 quite differently.

8 BRANCH CHIEF BEVAN: Yes. And the rental car

9 agencies are an entity that want to get into this business

10 with a subscription and intelligence reservation system in

11 addition to their application of the technologies in a

12 more incidental situation.

13 BOARD MEMBER ROBERTS: It sounds like you're

14 confident by the end of this period that all of these

15 rebates in effect will be requested and used as part of

16 the ride sharing program.

17 MR. PANSON: Yeah. We have interest, but you

18 know.

19 BOARD MEMBER ROBERTS: It sounds like weakly

20 optimistic maybe.

21 MR. PANSON: More than weakly optimistic, but

22 less than fully optimistic. I'm sorry.

23 BOARD MEMBER ROBERTS: That's the ultimate

24 answer.

25 BOARD MEMBER RIORDAN: But we don't have 74

1 knowledge of their business plans. We don't have

2 knowledge of their capital. And so you're hoping they're

3 successful. But you know, like any new venture, there's

4 no way in the world to know if these people are going to

5 come forward and actually make the purchase.

6 My feeling is as long as we have an alternative

7 where we can take whatever is in that pot leftover and

8 somebody's business plan doesn't work out and we can

9 redistribute it to people who are buying an electric

10 vehicle, well, I'm comfortable with it. But I don't know

11 whether these people ever make it in the world. I hope

12 they do. But I don't know.

13 And one thing we ought to do -- and it could give

14 somebody an excellent little project at some university --

15 is to follow this evolution of use of transportation and

16 see what we're really -- how far are they driving? Where

17 are they going?

18 CHAIRPERSON NICHOLS: Luckily, we have some

19 connections with universities. That's a good project.

20 All right.

21 Unless there are any other burning questions at

22 this point, I'm going to ask for a motion.

23 BOARD MEMBER BERG: I would just like to ask a

24 quick -- because I'm not quite sure where we're going yet.

25 Are you going to put that in the motion? 75

1 CHAIRPERSON NICHOLS: I wasn't actually planning

2 on making any changes. I was just going to ask to move

3 the recommendation at this point.

4 But if there are any specific amendments that

5 people would call on or request they want to add to, I

6 think we should be open to that.

7 BOARD MEMBER BERG: I guess for future, my

8 concern is that it feels to me that the funding is

9 benefiting a the right time at the right place. So those

10 manufacturers that happen to have cars coming out today

11 are really going to benefit just because of good timing.

12 And I think we have a lot of exciting cars coming

13 out. And part of this incentive program is to incentivize

14 from our perspective a lot of different types of vehicles

15 from many manufacturers to move this whole process

16 forward, not to incentivize the manufacturer that is

17 benefiting from good timing and therefore we have kind of

18 all of our eggs in a few baskets of technology rather than

19 spreading the incentive.

20 So for future, I'm not suggesting anything today.

21 But certainly for future, I would be interested in being

22 mindful that we really want to have as many clean cars out

23 on the marketplace that are gaining momentum that are

24 giving us information that can drive this technology

25 forward. 76

1 CHAIRPERSON NICHOLS: I totally agree with you.

2 I guess I would just add, as I understand it, there are

3 people looking at the future of 118 and a number of kind

4 of significant changes to reflect the information that

5 you've gained over the last few years and the phenomenal

6 success we've had. This program needs more money. And

7 when it gets more money, we need to be able to spend it I

8 think in ways that accomplish the kinds of goals you're

9 talking about. So points well taken.

10 BOARD MEMBER RIORDAN: Do you need a motion?

11 CHAIRPERSON NICHOLS: I do.

12 BOARD MEMBER RIORDAN: I'd like to move --

13 CHAIRPERSON NICHOLS: Staff wants to add

14 something else.

15 MR. PANSON: I'm going to defer to Tom.

16 CHAIRPERSON NICHOLS: Tom has moved to speak and

17 I think we should hear from him.

18 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:

19 Ms. Berg, I think that's an example of one of the targeted

20 approaches that we could consider for next year for -- I

21 think what you're suggesting is if you're a new

22 manufacturer into the marketplace, maybe you could have

23 incentives for the first X vehicles. And then after that,

24 you wouldn't get any. That would be one of the kind of

25 things that we could look at next year when quite simply 77

1 the number of vehicles being sold is going to drive our

2 ability to fund anything more than a few hundred dollars

3 probably if we gave it to everybody. So that's a great

4 idea.

5 BOARD MEMBER BERG: Another thing. This is a

6 great problem to have. From a business perspective, this

7 really means that we're looking at the right things and

8 when you have too much, that's not a bad problem.

9 MR. PANSON: I'll just remind the Board, we bring

10 the plan to you every year with every new funding

11 allocation. You're going to see us a year from now and be

12 able to tell us whether you like the approach we're

13 taking.

14 CHAIRPERSON NICHOLS: We're going to want

15 changes. We'll be in conversations before that, I'm sure.

16 BOARD MEMBER D'ADAMO: I'd like to make a motion,

17 but just want to make certain that the Resolution will

18 include language directing staff to come back next year

19 with some type of approach to address the San Joaquin

20 Valley issues that I raised earlier.

21 CHAIRPERSON NICHOLS: Yes. And also to raise the

22 issues about the making we're properly incentivizing new

23 technologies that are going to contribute to our air

24 quality goals here. And not just the -- because we're

25 clearly at a point of success where if they get to where 78

1 they want, Nissan could -- customers of the Leaf could get

2 all the funds. And that would be good for us in one sense

3 but not accomplishing all of our goals.

4 BOARD MEMBER SPERLING: Along those lines, we

5 didn't talk much about the heavier vehicles. And I think

6 I'd like to add something that there be some assessment of

7 how we make sure we're really strategically stimulating

8 investments in trucks, use of hybrid and electric drive

9 technology in trucks. Because that's probably in many

10 ways more important. We're likely to have a more

11 beneficial impact there. But we need to think about it

12 strategically.

13 CHAIRPERSON NICHOLS: Okay. So there's three

14 points we'd like included in the resolution. We have a

15 motion from Ms. D'Adamo.

16 Do we have a second?

17 BOARD MEMBER RIORDAN: Second.

18 CHAIRPERSON NICHOLS: All in favor, please say

19 Aye.

20 (Ayes)

21 CHAIRPERSON NICHOLS: Opposed? None.

22 Thank you very much.

23 This has really been an interesting discussion.

24 Appreciate everybody who come out to give us their input.

25 Okay. 79

1 This is a public hearing to consider the approval

2 of the proposed State Implementation Plan revisions for

3 the eight-hour ozone standard, and minor technical

4 revisions to the PM2.5 transportation conformity budget --

5 changes to the 8-hour and PM2.5 SIP transportation

6 conformity budgets. Hard to get all that into one

7 mouthful. Thank you, everybody.

8 And just to explain a little bit, what we're

9 talking about here relates to an action that we took with

10 respect also to the South Coast and San Joaquin in

11 December where we acted on the diesel rules for in-use

12 trucks and off-road equipment. We made similar technical

13 revisions to the SIPs for the South Coast and the San

14 Joaquin Valley in April for the PM2.5 SIPs. And now we're

15 going back to the ozone SIP.

16 This stuff is mind-numbing, if I may say so.

17 This is to people that sit on this Board and pay attention

18 to these issues. I hope we can explain it in our

19 presentation here to the satisfaction of -- I know some

20 people always say it's for their mother or their great

21 aunt or whoever. Let's try to explain it for the benefit

22 of anybody in the audience.

23 Mr. Goldstene.

24 EXECUTIVE OFFICER GOLDSTENE: Let me see what I

25 can do here? 80

1 As a result of the revisions of the PM2.5 SIPs

2 that you took action on in April, EPA has now proposed to

3 approve the South Coast and San Joaquin Valley PM2.5 SIPs,

4 with the exception of a contingency measure issue we're

5 still working on with EPA.

6 EPA's final approval would recognize actions

7 taken by ARB and the South Coast and San Joaquin Valley

8 districts to comply with the 2014 attainment deadline.

9 Today, staff is proposing parallel revisions for

10 ozone. These revisions will provide the necessary

11 information for EPA to fully approve the San Joaquin

12 Valley and South Coast 8-hour ozone SIPs. Under a consent

13 decree, EPA must take final action on these ozone SIPs by

14 December 15th of this year.

15 Staff is proposing to update the progress

16 calculations and transportation conformity budgets to

17 account for emission inventory improvements and regulatory

18 action since the SIPs were adopted in 2007. Staff is also

19 proposing to revise the rulemaking calendar for the

20 agricultural equipment measure for the San Joaquin Valley

21 consistent with the other remaining measures.

22 Finally, staff will update the action ARB and the

23 districts are taking too identify and implement advanced

24 technologies to reduce ozone-forming emissions.

25 Mr. Jeff Lindberg with the Air Quality and 81

1 Transportation Planning Branch will now provide the staff

2 report and describe the proposed SIP revision.

3 Jeff.

4 (Thereupon an overhead presentation was

5 presented as follows.)

6 CHAIRPERSON NICHOLS: So far you're doing great.

7 EXECUTIVE OFFICER GOLDSTENE: Thank you.

8 AIR POLLUTION SPECIALIST LINDBERG: Thank you,

9 Mr. Goldstene.

10 Good morning, Madam Chair and members of the

11 Board.

12 In this presentation, I'll describe California's

13 progress implementing the 8-hour ozone State

14 Implementation Plans, or SIPs, in the South Coast and San

15 Joaquin Valley -- San Joaquin Valley and present a

16 proposed SIP revisions to account for the Board's recent

17 actions to reduce emission from diesel-fueled vehicles and

18 equipment. The revisions to ozone SIPs staff is proposing

19 today largely mirror these the Board adopted in April for

20 the PM2.5 SIPs.

21 --o0o--

22 AIR POLLUTION SPECIALIST LINDBERG: Today, we are

23 asking the Board to approve revisions to the South Coast

24 and San Joaquin Valley ozone SIPs. Staff's as proposed

25 ozone SIPs revisions are limited to reasonable further 82

1 progress tables and associated reductions for contingency

2 purposes, adjustments to the transportation conformity

3 budgets, an updated ARB rulemaking calendar for the in-use

4 agricultural equipment measure, and an update describing

5 ARB's actions to identify advanced emission control

6 technologies.

7 Finally, ARB staff is proposing minor technical

8 updates to the PM2.5 SIP transportation conformity budgets

9 for the South Coast and San Joaquin Valley.

10 --o0o--

11 AIR POLLUTION SPECIALIST LINDBERG: Let's start

12 with a brief look at where we are in the ozone SIP

13 process.

14 --o0o--

15 AIR POLLUTION SPECIALIST LINDBERG: In 2007, the

16 Board approved the South Coast and San Joaquin Valley

17 ozone SIPs and submitted them to U.S. EPA for approval.

18 Both the South Coast and San Joaquin Valley have the most

19 significant ozone attainment challenges in the nation, so

20 the SIPs identified an expeditious attainment deadline of

21 2023 as allowed by the Clean Air Act.

22 The core of those SIPs was the State's strategy

23 to control emissions through the accelerated turnover of

24 existing diesel-powered vehicles and equipment and to

25 clean up emission source associated with California's 83

1 major ports.

2 Recognizing the challenge these two areas were

3 faced with, the SIPs also included the commitment to

4 reduce emissions through long-term advanced technology

5 strategies.

6 --o0o--

7 AIR POLLUTION SPECIALIST LINDBERG: As soon as

8 the SIPs were adopted, ARB and the districts began

9 implementation with a focus on reducing emissions from

10 existing diesel vehicles and equipment.

11 The Board adopted regulations that accelerate the

12 cleanup of commercial trucks, off-road construction and

13 mining equipment, and goods movement equipment used at

14 ports and rail yards.

15 The Board also adopted controls on consumer

16 products, which are significant sources of ozone-forming

17 volatile organic compound emissions. To ensure passenger

18 vehicles remain as clean as possible, the California

19 Bureau of Automotive Repair strengthened the Smog Check

20 Program by including diesel vehicles, tightening cut

21 points, and inspecting evaporative emission control

22 systems.

23 Both the South Coast and San Joaquin Valley Air

24 Districts have also taken significant actions to meet

25 commitments to reduce emissions from sources under their 84

1 jurisdictions.

2 --o0o--

3 AIR POLLUTION SPECIALIST LINDBERG: Today's

4 revisions are needed in order to account for emission

5 changes due to the Board's recent actions. The revisions

6 follow the same methodology staff used to revise the PM2.5

7 SIP in April of this year. Since the Board's April action

8 only applied to the PM2.5 SIPs, the staff is now proposing

9 revisions to the ozone SIPs. EPA is currently reviewing

10 the South Coast and San Joaquin Valley ozone SIPs for

11 federal approval and is required to complete this review

12 by December of this year.

13 --o0o--

14 AIR POLLUTION SPECIALIST LINDBERG: I'll now turn

15 my focus to the proposed SIP revisions.

16 --o0o--

17 AIR POLLUTION SPECIALIST LINDBERG: There are

18 four parts to ARB's proposed ozone SIP revisions. The

19 first two updates are largely accounting exercises to

20 reflect recent State and local rulemaking actions and the

21 economic recession.

22 With respect to the reasonable further progress

23 demonstrations, our current estimates now indicate that we

24 are achieving even greater near-term emission reductions

25 than was envisioned when the SIPs were initially adopted. 85

1 In addition to meeting the required progress

2 benchmarks, the updated demonstrations continue to set

3 side sufficient additional reductions to satisfy federal

4 contingency measure requirements. The proposed

5 transportation conformity budgets ensure that emissions

6 from motor vehicles remain within the limits established

7 in the SIPs and reflect adopted regulations.

8 Staff is also proposing minor technical updates

9 to the PM2.5 SIP transportation conformity budgets. These

10 updates account for emission reduction changes in district

11 mobile source measures as well as correct minor data entry

12 errors in the existing PM2.5 SIP budgets.

13 In May, EPA approved the San Joaquin Valley's

14 indirect source review, or ISR, rule, but disallowed

15 California from taking direct emission reduction credit

16 for the rule. The proposed budgets account for EPA's

17 action. The rule requires an land developers to mitigate

18 the indirect emissions from new development or pay a

19 mitigation fee to the district to fund off-site emission

20 reduction programs. We will work with EPA to quantify the

21 benefits as they occur so that credit can be taken in the

22 future.

23 In the South Coast, the updated budget reflects

24 changes to how the district quantifies emission reductions

25 achieved through the high-emitting vehicle identification 86

1 program. The program funds durable repairs on

2 high-emitting vehicles or incentivizes their removal

3 through the district's vehicle scrap and replace program.

4 The PM2.5 budgets initially included the emission

5 reductions district staff expected to achieve through the

6 measure. However, the actual emission reductions achieved

7 by the high emitter ID program have not yet been

8 quantified by the district. The district remains

9 committed to implementing this program and achieving the

10 committed emission reductions.

11 --o0o--

12 AIR POLLUTION SPECIALIST LINDBERG: Similar to

13 the rulemaking calendar's updates approved in April, staff

14 is proposing to update the rulemaking calendar for the

15 cleaner in-use agriculture equipment measure. This

16 measure, along with the measures updated in April, will be

17 brought to the Board for consideration in 2013.

18 The April revision addressed the outstanding

19 commitments that would be in place for PM2.5 attainment.

20 While the San Joaquin Valley's PM2.5 SIP did not rely on

21 emission reductions from the agricultural equipment

22 measure, the Valley's ozone SIP did. Staff is not

23 proposing changes to the specific measure beyond the

24 regulatory development timing.

25 Early reductions are already occurring through 87

1 incentive-based programs, such as one run by the Natural

2 Resources Conservation Service to modernize California's

3 agricultural tractor fleet. To date, the NRCS and the

4 Valley Air District have provided more than $40 million to

5 modernize more than 800 tractors in the San Joaquin Valley

6 and the district is currently soliciting an additional

7 projects to replace 700 more tractors over the next year.

8 --o0o--

9 AIR POLLUTION SPECIALIST LINDBERG: Finally,

10 staff is proposing to update the long-term strategy

11 commitment to expand the discussion of actions that ARB

12 and the districts are taking to identify and implement

13 advanced technologies to reduce ozone-forming emissions.

14 For 8-hour ozone non-attainment areas classified

15 as extreme, the Federal Clean Air Act allows ozone SIPs to

16 include a long-term strategy for identifying and

17 implementing advanced technology measures. These advanced

18 technologies must be implemented by 2020.

19 --o0o--

20 AIR POLLUTION SPECIALIST LINDBERG: As California

21 moves towards a low-carbon future, many of the

22 technologies and strategies that reduce the state's

23 impacts on climate change will also reduce emissions from

24 the same combustion sources that are the root of the

25 State's ozone attainment challenges. 88

1 While still in the early stages of development

2 and commercialization, we expect that by 2020 we would see

3 lower emission energy and vehicle technologies and more

4 efficient transportation and goods movement systems.

5 These technologies and systems would serve the dual

6 purpose of meeting California's ozone challenges and

7 reducing the state's contribution to global climate change

8 as required by AB 23.

9 --o0o--

10 AIR POLLUTION SPECIALIST LINDBERG: Demonstrating

11 advanced technologies is a collaborative effort at the

12 State, federal, and local levels. One year after the SIPs

13 were adopted, ARB, EPA, and the South Coast and San

14 Joaquin Valley Air Districts signed a Memorandum of

15 Agreement establishing the Clean Air Technology

16 Initiative, with the purpose of evaluating innovative

17 technologies that have the potential to reduce emissions.

18 As you heard earlier this morning, California's

19 Assembly Bill 118 established ARB and CEC programs with

20 the goal of fostering advanced clean technologies for

21 vehicles and the fuels they use. During the previous

22 item, staff outlined the important air quality investments

23 the staff is making for the two programs.

24 Locally, both the San Joaquin Valley and the

25 South Coast Air Districts have programs to explore 89

1 advanced technologies that could reduce emissions from

2 sources within their boundaries. In each of these

3 efforts, there is extensive collaboration.

4 --o0o--

5 AIR POLLUTION SPECIALIST LINDBERG: In addition

6 to the four SIP elements I just described, staff also

7 looked at the impacts the improvements to the emissions

8 inventory that resulted from recent rulemaking activities

9 would have on the air quality modeling in the South Coast

10 and San Joaquin Valley.

11 Although the emission changes in both the South

12 Coast and San Joaquin Valley are small, the changes in the

13 San Joaquin Valley are larger due to additional

14 improvements in the PM2.5 SIP that was developed in 2008.

15 Determining the specific impacts of these

16 improvements on the attainment emissions targets can only

17 be done through a comprehensive new air quality modeling

18 effort. Based on a qualitative analysis of the modeling,

19 ARB staff believe the attainment target is still

20 appropriate, which would reflect a 72 percent reduction in

21 NOx emissions for 2002 levels. However, up to a 75

22 percent reduction could be needed based on the inventory

23 used in the original modeling. In either case, the

24 Board's commitment in the 2007 State strategy is to

25 achieve the emission levels that are needed to provide for 90

1 attainment.

2 In order to re-evaluate the attainment targets,

3 we plan to conduct new air quality modeling reflecting an

4 updated emissions inventory. We would commit to complete

5 this modeling by the end of 2014 or the deadline for

6 submission of new SIPs for the expected revision to the

7 8-hour ozone standard, whichever is earlier. This revised

8 modeling would be used to establish updated emission

9 targets and define the emission reductions needed as part

10 of the long-term strategy that must be in place by 2020.

11 ARB staff had a productive discussion with EPA regarding

12 this approach, and we will continue to work with them to

13 ensure the ozone SIP is approvable.

14 --o0o--

15 AIR POLLUTION SPECIALIST LINDBERG: In closing,

16 staff recommends that the Board approve submittal of the

17 SIP revisions and transportation conformity budgets to

18 EPA. Doing so will provide EPA with the information it

19 needs to approve California's ozone SIPs as well as the

20 PM2.5 SIP transportation conformity budgets.

21 Thank you.

22 CHAIRPERSON NICHOLS: Would you anticipate then

23 that these changes being forwarded to EPA that EPA will be

24 able to approve these SIPs in December?

25 DEPUTY EXECUTIVE OFFICER TERRY: Yes. We did get 91

1 a letter from EPA you should have in your packet. And

2 they recognize, as you heard in the staff report, that

3 comprehensive modeling would need to be done to really

4 address the uncertainty as to whether it's a 72 or a 75

5 percent reduction that's ultimately needed.

6 So our commitment that was embedded in the 2000

7 SIP that the Board approved essentially included a 75

8 percent reduction commitment. So that would go forward

9 and remain in place. We're not proposing any changes to

10 that commitment.

11 CHAIRPERSON NICHOLS: We also had a recent bit of

12 controversy with the EPA over the issue of NOx versus VOC

13 reductions in the Valley SIP. Is that issue also in the

14 course of being resolved in this way or some other path to

15 resolution?

16 DEPUTY EXECUTIVE OFFICER TERRY: Actually, that

17 was happily resolved with their proposal to approve the

18 PM2.5 SIP. And this is only for ozone. So it's not an

19 issue here.

20 CHAIRPERSON NICHOLS: Good. Okay. Glad to hear

21 it.

22 Dr. Sperling.

23 BOARD MEMBER SPERLING: Along the theme of

24 mind-numbing, you know, I used to know a fair amount about

25 transportation conformity budgets. They never made much 92

1 sense to me years and years ago. I mean, are we -- is

2 this -- should I be paying attention to that?

3 DEPUTY EXECUTIVE OFFICER TERRY: We're relieving

4 you of that painful obligation.

5 The bottom line is that the conformity budgets

6 are very important to ensure that the transportation

7 planning process is consistent with the air quality

8 planning process. So the budgets that have to be adopted

9 must be consistent with the emission estimates for on-road

10 vehicles that are in the progress calculations as well as

11 the attainment calculation. So that's the purpose of all

12 the back and forth. And when we have the on-road truck

13 rule and new emission estimates, then that needs to be --

14 the budgets need to be adjusted.

15 So, for example, we would not want a growth in

16 VMT to overtake the benefits of our truck rule, for

17 example. So that's why we do these adjustments.

18 BOARD MEMBER SPERLING: Not to be demeaning, but

19 is this really just in the noise or -- these conformity

20 budgets? You know, I remember --

21 CHAIRPERSON NICHOLS: Do they constrain anything

22 or push any action --

23 BOARD MEMBER SPERLING: Exactly.

24 DEPUTY EXECUTIVE OFFICER TERRY: Well, they're

25 essentially a backstop because under state law we're 93

1 required to take the VMT estimates and the transportation

2 plan and imbed them in the SIP. So at the time of the

3 planning process, that's where the opportunity is to

4 achieve more reductions from the transportation sector.

5 But once those plans are in place, it's critical

6 that those same assumptions and estimates or projections

7 be incorporated into the SIPs so that there's not any

8 consistency. And that's -- you know, you can say it's in

9 the noise from a calculational standpoint where we make

10 these minor adjustments, but it's really an essential part

11 of the ZIP planning that we have a sound estimate of the

12 transportation emissions for the future.

13 BOARD MEMBER SPERLING: Being a little more

14 positive with the SB 375 process where models are being

15 developed that really are more fine-grained really than

16 anything I understand used for the conformity analysis, is

17 there some way of taking advantage of those models,

18 creating some kind of synergies here somehow out of this

19 mess of models and calculations and, you know, to create a

20 more substantive exercise that really is useful for

21 creating incentives and guiding investments and so on?

22 DEPUTY EXECUTIVE OFFICER TERRY: That's a great

23 question, and it is very much a positive. Over the years,

24 the transportation -- details of the transportation

25 modeling has not been something that has had a lot of 94

1 scrutiny within a SIP planning process. So this has been

2 very impressive how the NPOs have opened up their books

3 and posting all the data. They are running sensitivity

4 analysis as we do of the staff's technical review of the

5 greenhouse gas reductions attributed to the sustainable

6 communities strategies within the transportation plans.

7 There is a lot of work going onto make it more

8 transparent and open; the opportunity to run different

9 types of scenarios. As we move forward, to improve the

10 models so that the benefits of sustainable community

11 strategies can better be accounted for. And when we had

12 our Regional Targets Advisory Committee, there was a lot

13 of discussion about the need to improve the models to

14 better reflect some of these important strategies we

15 expect to be developed under SB 375.

16 So we think it's very important work that's going

17 on that will help us with our SIP process and improve the

18 modeling all around.

19 BOARD MEMBER SPERLING: I know you've got at

20 least one great modeler on your staff, a good U.C. Davis

21 graduate that will help with this.

22 DEPUTY EXECUTIVE OFFICER TERRY: Absolutely.

23 More than one.

24 CHAIRPERSON NICHOLS: Okay. Anybody else want to

25 speak up on behalf of any other University of California 95

1 branch or any other programs?

2 I have no witnesses who have signed up to speak

3 on this item, so I believe my assessment of it was

4 correct.

5 However, I know it's important. And in all

6 seriousness, it's an important step forward because it

7 will enable us to have an approved SIP. And that's

8 probably something that -- we know that's something of

9 great value and not something we've always had. That

10 really is good news.

11 I would like to ask for a motion to approve the

12 staff recommendation.

13 BOARD MEMBER RIORDAN: I would so move, Madam

14 Chair, and thank staff for briefing me on this. It's a

15 very positive thing moving forward.

16 CHAIRPERSON NICHOLS: Second?

17 BOARD MEMBER BERG: Second.

18 CHAIRPERSON NICHOLS: All in favor please say

19 Aye.

20 (Ayes)

21 CHAIRPERSON NICHOLS: Any opposed?

22 Great. Thank you. And congratulations.

23 CHAIRPERSON NICHOLS: We have one other item

24 before us that is a very pleasant duty, but before I do

25 that, I'm actually going to call for public comments, 96

1 because when we're done, we're going to adjourn the

2 meeting. So if I may, if there's anyone in audience who

3 is here hoping to speak during the open public comment

4 time -- we have one. Okay.

5 Reede Stockton of the Center for Community,

6 Democracy, and Ecology. Please come forward.

7 MR. STOCKTON: Chairman Nichols and members of

8 the Board, thanks for very much for this opportunity to

9 speak with you today.

10 I want to make three procedural recommendations

11 regarding to the scope -- and regarding the Scoping Plan

12 functional equivalent document that you're due to consider

13 on August 24th.

14 AB 32 specifically directs ARB to avoid

15 disproportionate impacts on communities of color and

16 low-income communities and to ensure that GHG reduction

17 activities complement existing air quality regulations and

18 reduce toxic air contaminant emissions. And to ensure

19 that ARB took that direction seriously, the Board was

20 further directed to empanel an Environmental Justice

21 Advisory Committee consisting of representatives from

22 impacted communities throughout the state that included

23 low-income communities and communities of color.

24 The Environmental Justice Advisory Committee

25 convened by ARB has recommended against cap and trade, but 97

1 ARB has chosen to disregard that recommendation. And I

2 think it's an indication of the working relationship that

3 ARB has had with the Environmental Justice Advisory

4 Committee that seven of the eleven members of EJAC are

5 parties to the lawsuit that was brought against ARB and

6 asking to reconsider the cap and trade recommendation.

7 So the question now is how to repair the

8 relationship between ARB and communities of color and

9 low-income communities. And that's the purpose of the

10 three recommendations I have.

11 I'd like to recommend that ARB slow down the time

12 line for consideration of the functional equivalent

13 document supplement.

14 Second, I'd like to recommend that ARB fully

15 consider a broad range of alternatives to cap and trade by

16 expanding the options considered in both number and

17 detail.

18 And third, I'd like to recommend that ARB hold a

19 series of hearings to consider those alternatives in the

20 communities that are most heavily impacted by toxic air

21 contaminants.

22 There's still an opportunity for ARB to

23 demonstrate that it strongly supports the environmental

24 justice mandate in AB 32. And I'd like to urge ARB to

25 take advantage of that opportunity. 98

1 CHAIRPERSON NICHOLS: Thank you. Thank you.

2 Did you have a written version of those comments?

3 MR. STOCKTON: No, but I will be submitting some

4 written comments.

5 CHAIRPERSON NICHOLS: Thank you very much. I

6 took notes. Appreciate your coming. Okay.

7 We have another public commentor?

8 MR. FOLKS: Yes. Hi, Madam Chair. Tom Folks

9 here with MightyCon representing Bosch, Audi, BMW,

10 Daimler, and BMW.

11 Just a reminder to some of your Board members,

12 I've been talking to Clarlyn Fraiser of your staff. We

13 have a couple diesel cars out at the corner of I and 10th

14 Street. Between now and the time you get to your next

15 engagement after this, please stop by and test drive a

16 car. Won't take you but a few minutes. We're right

17 outside.

18 CHAIRPERSON NICHOLS: Thank you.

19 If we don't go to the car, the cars will come to

20 us.

21 It's now my pleasant responsibility here to move

22 on to the Haagen-Smit Clean Air Awards. And I believe the

23 idea is that I'm going to move down there to the present

24 the awards with Mr. Goldstene's help and that the award

25 recipients will come forward. 99

1 EXECUTIVE OFFICER GOLDSTENE: We have some

2 opening --

3 CHAIRPERSON NICHOLS: Oh, we do.

4 EXECUTIVE OFFICER GOLDSTENE: We have slides and

5 pictures.

6 CHAIRPERSON NICHOLS: That happens before we

7 present the award.

8 EXECUTIVE OFFICER GOLDSTENE: Yes.

9 CHAIRPERSON NICHOLS: Sorry. I wasn't here for

10 the rehearsal. I was in Washington.

11 EXECUTIVE OFFICER GOLDSTENE: It's been carefully

12 blocked.

13 CHAIRPERSON NICHOLS: Oh, look. People are

14 coming forward. This is great. This is so well

15 organized. I see the awards lined up there. They look

16 beautiful.

17 So which part of this script do I get to read?

18 EXECUTIVE OFFICER GOLDSTENE: You could actually

19 read the script. I think either one of us could make this

20 presentation. There are a series of slides --

21 CHAIRPERSON NICHOLS: The thing that says

22 discussion at the beginning? I have some slides.

23 EXECUTIVE OFFICER GOLDSTENE: Where it says slide

24 one.

25 CHAIRPERSON NICHOLS: Oh, I do. It begins by 100

1 saying the Haagen-Smit awards. Our Executive Officer,

2 James Goldstene, will introduce the awards and this year's

3 recipients. I will then invite each recipient to come to

4 the podium to receive their award and say a few words.

5 EXECUTIVE OFFICER GOLDSTENE: How's that?

6 CHAIRPERSON NICHOLS: Perfect.

7 (Whereupon a slide show presentation was made

8 as follows.)

9 EXECUTIVE OFFICER GOLDSTENE: So I'll go through

10 the slides as quickly. We're showcasing this year's

11 Haagen-Smit Clean Air award recipients here at today's

12 Board meeting.

13 At this annual events, we are reminded of the

14 important contributions of late Arie Haagen-Smit that he

15 made to air pollution science and the significance of his

16 career as ARB's first Chairman.

17 --o0o--

18 EXECUTIVE OFFICER GOLDSTENE: Haagen-Smit was the

19 native of the Netherlands, was a leader in developing air

20 quality standards based on his research efforts and is

21 known by many as the Father of Air Pollution Control.

22 Through a series of experiments, he found that

23 most of California's smog resulted from photochemistry

24 which emissions from motor vehicles and industrial

25 facilities reacted with sunlight to create ozone. This 101

1 breakthrough provided the scientific foundation for the

2 development of nationwide air pollution control programs.

3 Next slide.

4 --o0o--

5 EXECUTIVE OFFICER GOLDSTENE: Since 2001, the Air

6 Resources Board has sponsored the Haagen-Smit Clean Air

7 Awards. The awards are given to two or three people each

8 year to recognize significant career efforts in at least

9 one of several air quality categories, which are research,

10 environmental policy, science and technology, public

11 education or community service. Over the last ten years,

12 25 distinguished individuals have received the award.

13 This year's winners were chosen based on their

14 individual accomplishments. Although they all have

15 something in common, all three winners have contributed to

16 our efforts in California to reduce the health impacts of

17 diesel PM.

18 I'm pleased to announce the three recipients of

19 the award. Actually, Chairman Nichols, maybe you should

20 do this.

21 You can pick up or I can just --

22 CHAIRPERSON NICHOLS: I could begin with the

23 individual presentations. I would be thrilled to do that

24 actually.

25 EXECUTIVE OFFICER GOLDSTENE: Yes. 102

1 CHAIRPERSON NICHOLS: So I can read information

2 about them, and then I may editorialize a little bit

3 though in addition to what's the official script. I can't

4 help myself. Okay.

5 So our first awardee is Dr. John Froines, who's

6 being recognized for his work in the area of environmental

7 health research.

8 And is there a slide that's going to come up

9 here?

10 Dr. Froines has a long history of teaching and

11 conducting research on air pollution related health

12 effects. He's a professor in the Department of

13 Environmental Health Sciences at UCLA. He joined this

14 faculty of the School of Public Health in 1981. He holds

15 several key positions in health sciences and toxicology

16 programs, including serving as director of the Southern

17 California Particle Center and super site. He's also

18 Associate Director of the Southern California

19 Environmental Health Sciences Center and Director of the

20 UCLA Fogarty Program in Occupational and Environmental

21 Health. He has served as Director of UCLA's Center for

22 Occupational and Environmental Health Sciences for 25

23 years and was Deputy Director of the National Institute

24 for Occupational Safety and Health before coming to UCLA.

25 He also Chairs California's Scientific Review Panel on 103

1 Toxic Air Contaminants.

2 Dr. Froines' area of expertise is toxicology and

3 exposure assessment. His air pollution related research

4 includes studying the health effects of exposure to

5 particulate matter, lung cancer, and non-cancer health

6 effects attributable to air pollution and the biochemical

7 mechanism of the carcinogenicity of toxic air

8 contaminants.

9 Dr. Froines' teaching and research is highly

10 regarded for enhancing the understanding of toxic air

11 contaminants and their health impacts through his

12 dedication to translating scientific information in ways

13 that are useful for public policy setting. His work has

14 had a tremendous impact nationally and internationally.

15 Last year, his strong commitment to outstanding

16 research was recognized by the South Coast Air Quality

17 Management District for the Clean Air Award for his

18 promotion of good environmental stewardship.

19 I hate to be second to the AQMD in anything, but

20 in this regard, I'm happy to be able to join them in this

21 regard. As you can hear from what I've just read, John

22 has an extraordinary record as a scientist and as a public

23 servant. And we are thrilled to be able to recognize him

24 today for his commitment to providing strong scientific

25 basis for our actions. So thank you very much. 104

1 I'm going to go through these slides and then go

2 do the actual handing off of the awards.

3 --o0o--

4 CHAIRPERSON NICHOLS: So our next award goes to

5 Dr. Joan Denton. Dr. Denton has 29 years of professional

6 experience and consistent accomplishment in environmental

7 health programs. She recently retired after 13 years as

8 director of the California Office of Environmental Health

9 Hazard Assessment. During this time, she was responsible

10 for the performance of scientific risk assessments for the

11 regulation of chemicals in the environment and for

12 providing information about the health and environmental

13 risks of chemicals to government agencies and the public.

14 As Director, she was also responsible for

15 providing overall scientific guidance and consultation to

16 the Secretary of the Environmental Protection Agency and

17 the Cal EPA Boards and Departments, including ours.

18 Dr. Denton was appointed and reappointed as

19 Director of OEHHA by three different governors. During

20 her tenure at OEHHA, she was instrumental in the

21 identification of diesel particulate matter, environmental

22 tobacco smoke, and lead, just to site three not very

23 controversial items as toxic air contaminants.

24 California's air quality standards for

25 particulate matter, ozone, and nitrogen dioxide were 105

1 revised to include effects on sensitive populations,

2 including children and infants. She also oversaw the

3 implementation of the Safe Drinking Water and Toxic

4 Enforcement Act of 1986, also known as Prop. 65.

5 We're very proud that Dr. Denton was at ARB prior

6 to her serving as director of OEHHA so we can claim her as

7 one of our own. She worked in a number of programs,

8 including the identification of diesel particulate matter.

9 Thank you, Joan Denton, for your important

10 contributions to improving California's air quality.

11 --o0o--

12 CHAIRPERSON NICHOLS: And our third award, we're

13 very happy to be able to present three this year, goes to

14 Dr. Bradley Edgar in the area of science and technology.

15 Dr. Edgar is co-founder and President and Chief Technology

16 Officer of Cleaire Advanced Emission Controls, a company

17 which is based in the San Francisco Bay Area.

18 ARB's diesel regulations have relied on the

19 development and commercialization of retrofit technologies

20 over the last decade. I want to make that point and say

21 it twice. We couldn't adopt that standards that we do if

22 we didn't have the technology that Dr. Edgar has pioneered

23 as a basis for saying this can be done. We have to have

24 that as a part of our standards setting or we could not

25 have been able to move forward as we have aggressively to 106

1 protect public health.

2 His work has pioneered important breakthroughs in

3 developing advanced technologies. Cleaire has emerged as

4 a leader in the diesel retrofit market, having received

5 more than ten ARB verifications for its products and

6 delivering more than 11,000 diesel retrofits into

7 commercial use.

8 Dr. Edgar began researching and working in the

9 field of mechanical engineering nearly 20 years ago and

10 has been the inventor or co-inventor for 11 U.S. patents

11 related to U.S. emission control technology. Dr. Edgar

12 earned a reputation as an industry leader helping to

13 deploy the technology needed to keep California's air

14 clean. He's demonstrated leadership in the California

15 business community, helping to solve environmental

16 problems while also contributing to economic development

17 and job growth.

18 In 2008, Cleaire was awarded the Clean Air Award

19 for technology and research by Breathe California, in

20 recognition of the company's contribution to improving air

21 quality. So thank you, Brad, for your commitment to

22 innovation and clean air.

23 And now I believe we can ask all three of these

24 individuals to come forward and receive their awards and

25 get your pictures taken with James Goldstene and myself. 107

1 And Board members get to ask questions -- you can ask any

2 kind of questions you like or make comments. Let's all

3 have a round of applause.

4 (Applause)

5 CHAIRPERSON NICHOLS: It's really exciting to

6 have the three of you here today. And I just can't say

7 enough about how great it is that we're able at one time

8 to recognize people who have done something in an area

9 which was very controversial at the time that we began.

10 I'm thrilled to say that we have now been joined by many

11 other agencies worldwide in this regard. When we started,

12 it was a lonely path. And each of these individuals I

13 know took a lot of heat in various ways for the work they

14 did and kept true to their science, scientific integrity,

15 and their willingness to serve the public good. So thank

16 you again.

17 (Whereupon the awards were presented.)

18 (Applause)

19 DR. FROINES: I was going to say something.

20 CHAIRPERSON NICHOLS: You have three minutes,

21 remember.

22 (Laughter)

23 DR. FROINES: I'll address the Board. I think I

24 can do three minutes. You know, the longer the talk, the

25 more difficult it is to do a good job. 108

1 So anyway, first, I want to thank the Board for

2 awarding me the Haagen-Smit award. It's truly a

3 significant honor. I will cherish it throughout my

4 continuing career -- continuing career.

5 I'm pleased to receive the award also since I

6 follow distinguished scientists, including our awardees

7 today. And so I'm in a good group of people, and I'm very

8 proud to be part of that group of people.

9 As you know, working in the field of air

10 pollution is complicated and it's controversial. But I'm

11 proud to say it has been an endeavor that I will hold as

12 one of my most important contributions. In particular,

13 following on what Mary said, I want to single out the role

14 of the Scientific Review Panel who have been before you a

15 number of times in the identification of diesel

16 particulate as a toxic air contaminant. As you know,

17 diesel remains controversial, but there is no doubt in my

18 mind as a scientist that it is damaging toxicant which

19 adversely affects people's health.

20 I'm proud of our contribution in the science and

21 believe that the policy decisions the Board and ARB staff

22 have made are very beneficial to protecting the public

23 health. The SRP and OEHHA has addressed more than 300

24 risk assessments during our history, and that puts

25 California in the forefront of toxic air contaminants in 109

1 the .

2 As Mary said, I have directed the Southern

3 California Particle Center for twelve years, and we have

4 conducted exemplary research. Our team has demonstrated

5 continuing problems, including cardiovascular disease,

6 neurologic effects, developmental effects, allergic airway

7 disease, and asthma. We've characterized the physical and

8 chemical properties of airborne particulate matter and

9 vapor phased compounds.

10 We have been making important contributions to

11 the mechanisms of disease from air pollutants, and we are

12 developing crucial tools to study the road map -- the road

13 map from upstream airborne exposures to downstream disease

14 and illness. In other words, our research tries to

15 develop the mechanistic underpinnings of health effects.

16 And in particular, we are trying to define with great care

17 the starting point and the subsequent steps that

18 ultimately lead to health effects.

19 We've developed probably ten assays, probably ten

20 quantitative assays, and those quantitative assays have

21 provided important dose response information, and that

22 work continues.

23 I want to just mention two new areas that are I

24 think quite important. Our recent work on the toxicity of

25 vapors, not only particles, have shown important 110

1 toxicologic outcomes. Vapors are toxic, and they have not

2 gotten the attention that they deserve. And in the

3 future, we're going -- we don't regulate the vapors, for

4 example. We regulate diesel particulate, not diesel

5 exhaust. And we need to address the vapor phase in the

6 future.

7 Secondly, our recent AQMD British petroleum

8 funded study on emissions and consequences of rail traffic

9 has produced significant results, and we have demonstrated

10 significant toxicity associated with diesel from rail

11 yards: San Bernardino, Long Beach, and Commerce in

12 Southern California. And so it's not just vehicles we

13 need to be concerned with, but we need to look into the

14 rail issue in greater detail.

15 Again, I'm proud of our work, and I believe we've

16 made substantial contributions. I'm very pleased to have

17 worked with fine scientists, including ARB and AQMD over

18 the past 30 years. I'm very pleased to have contributed

19 to the overall effort. And I thank you again. And I wish

20 you all the best, and I appreciate your recognition.

21 Thank you.

22 (Applause)

23 DR. DENTON: Mary, I think I can keep mine under

24 three minutes.

25 I want to follow John and just echo what he said 111

1 in the beginning. I really want to express my sincere

2 appreciation to the Board for this honor.

3 When I look at the people who proceeded me,

4 whether it be John Holmes in the very beginning, Jim

5 Pitts, Mike Walsh, Margo Oge, Mary Nichols, I mean, so

6 many pioneers, so many people that I really looked up to

7 during my career. And to join that group along with John

8 and Brad, it really is a privilege.

9 And I'm also mindful this isn't the end, that

10 there will be other individuals who will be expressed in

11 the future and to join that group.

12 Like I was saying earlier, it's like a metal of

13 honor from the ARB. It's a great award and how much I

14 appreciate it.

15 As you mentioned in the beginning, I did start my

16 career as a staff person at ARB. So I'm much a product of

17 the ARB. I learned about state government. I learned

18 about bureaucracy. I learned about the role of a

19 regulatory agency. I came in with a science degree. But

20 still, my whatever was honed through my work at the ARB.

21 And I learned about the culture of environmental

22 protection. And I used all of that when I became director

23 of OEHHA where I was fortunate to serve the last 13 years

24 of my career.

25 Many times I've left this building -- when I look 112

1 at all the work that we did and all the work that we've

2 done and all the work that you continue to do, it kind of

3 comes down to me when I left the building or when I would

4 leave the building in the evenings after work, I was very

5 conscious many times of the fact that what I was

6 breathing, I was breathing clean air that I could take a

7 deep breath and I didn't smell exhaust or I didn't smell

8 burning. I mean, the unusual times is when there was some

9 kind of an ag burning or brush fire or something.

10 The fact that you go to other counties and you

11 get off the plane and you immediately begin to smell the

12 air. How much we have to be thankful for for the work

13 that the Air Board and my agency and other regulatory

14 agencies have done in California and why you and why we

15 continue to be leaders.

16 Over the years as my career, I did learn -- as

17 director, I did learn a quote at ARB that I'd like to --

18 and it's not because I was at ARB, but here is the quote.

19 It's "nothing is impossible to the person who doesn't have

20 to do it." I'm sure it was just incidental that I was at

21 ARB at the time. But anyway, I quote that award because

22 there are so many people and so many people in the room

23 here who share in this aware. It is an individual award

24 with my name on it.

25 Without these people's support, without their 113

1 commitment, without their professionalism, without their

2 hard work, I would not be standing here today.

3 So first of all, I would like to have the people

4 who were in the Air Unit at OEHHA who are in the Air Unit

5 at OEHHA to stand and be recognized. Come on, stand up.

6 (Applause)

7 DR. DENTON: And then I would like actually the

8 entire part of the audience that is the OEHHA staff to

9 stand and be recognized. Maybe they didn't work in the

10 Air Unit. But they deserve much of the recognition.

11 (Applause)

12 CHAIRPERSON NICHOLS: You brought your own

13 cheering section.

14 (Laughter)

15 CHAIRPERSON NICHOLS: That's great.

16 DR. DENTON: And finally, I'd also like to

17 recognize two of my relatives who are here, my sister and

18 my cousin: My sister, Janet and my cousin, Peggy. I

19 really appreciate them being here.

20 (Applause)

21 DR. DENTON: So finally, I'd like to say over my

22 years in state service and in the spirit of Dr.

23 Haagen-Smit, I really have come to realize how connected

24 we are to the natural world. We often so much take it for

25 granted in that we many times I think take the approach 114

1 the natural world exists to help our survival.

2 But I have come to believe -- and I think this

3 will be what I'm continuing to do in my future career. I

4 have come to believe the natural world has a right to be

5 protected, and that we -- we are fortunate to be able to

6 do so.

7 So it's this effort to which I have dedicated my

8 professional life, and I'm really grateful to you for the

9 recognition of that. So thank you very much.

10 CHAIRPERSON NICHOLS: Thank you.

11 (Applause)

12 DR. EDGAR: Chair Nichols and members of the

13 Board and staff, thank you for giving me a few minutes to

14 speak. And Chair Nichols, I hope you won't sound the

15 buzzer or put the light on me too soon.

16 CHAIRPERSON NICHOLS: We haven't been counting

17 down the minutes.

18 DR. EDGAR: I felt that too many times in the

19 past.

20 This room and this podium are quite familiar to

21 me. And standing here now, I recall the first time I

22 testified before your Board in 2001. It was just after we

23 started Cleaire, but before the first verification

24 procedure and the first diesel fleet rule for transit

25 buses was even approved. This was the beginning. 115

1 It's amazing to think how much has happened over

2 the last ten years and about how much we have all learned

3 together.

4 To start, I'd like to thank a few people because,

5 for me, this is truly a team award. This is a Cleaire

6 award. But first I'd like to thank my wife and our three

7 children for their love and support. As in any

8 profession, the hours can be long. And for me, it's

9 sometime hard to leave work in the office. So I thank

10 them for their patience and their tolerance. They wanted

11 to be here today, but I told them that CARB meetings are

12 rated PG 13 and that they might not be able to sit still

13 with all the excitement.

14 Next, I'd like to thank the people who supported

15 my nomination, beginning with my research advisor from

16 Berkeley, Professor Bob Dibble, who initially suggested

17 that I be a candidate for this award. And then Professor

18 Bob Sawyer and other of my graduate advisors and mentors

19 in my career, some known to this audience. Kevin

20 Shanahan, the founder and owner of Cleaire; Joe Kubsh, the

21 Executive Director of MECA, who's here today; and also

22 Jack Broadbent, John White, and Diane Bailey who could not

23 be here today. It's been a privilege to know and work

24 with these people, and I'm grateful for their support.

25 Also like to thank my colleagues at Cleaire 116

1 starting with my former classmates and lab mates at the

2 story combustion laboratories at Cal, Dr. Mark Rumminger

3 and Dr. Michael Strikesber. They're world-class

4 combustion and emission engineers, the true heavy lifters

5 on the technical side of our business and absolute

6 believers in the integrity and purpose of our work.

7 I'd like to thank Ellen Garvy, Tom Swenson, and

8 Tim Taylor who helped me broaden my thinking so I can now

9 see how technology and engineering meshes with the policy

10 and regulation of air quality. And more recently, Gale

11 Plummer who became the Cleaire CEO a few years ago. Gale

12 has helped to transform our company from a scrappy

13 start-up into a full scale commercial business. He has

14 provided the adult supervision at the right time in our

15 growth and provided me with invaluable mentoring and

16 support for this process.

17 Most importantly, I'd like to thank Kevin

18 Shannahan, the founder, funder, and visionary leader of

19 Cleaire. And I'll say a little bit more about him in a

20 moment.

21 Finally, I want to thank the Selection Committee

22 for giving me this award. It certainly means a lot to me.

23 I'd also like to congratulate the other award

24 winners, Dr. Froines and Dr. Denton. As Bob Sawyer once

25 told me, good science makes good policy. And to that end, 117

1 I also want to thank you for your great work in science

2 and policy, specifically in the area of diesel emissions.

3 I believe your work has been absolutely fundamental in

4 identifying the harmful effects of diesel exhaust, which

5 in turn has led to a regulatory environment that

6 encourages technical innovation and entrepreneurial

7 reaction, which is the very heart of Cleaire.

8 If I could take just a few more minutes, I'd like

9 to share with you the short version of the Cleaire story.

10 I think it's a great California story and should serve as

11 a case study on how technical innovation and

12 entrepreneurialship can be spurred by strong policy and

13 regulatory leadership.

14 My interest in diesel emissions started a little

15 over 20 years ago when I was a first year graduate student

16 at UC Berkeley and one of Professor Dibble's first

17 students. One afternoon, we were on campus waiting at a

18 crosswalk when a diesel-powered bus accelerated from a

19 stoplight and lugged up a hill. An immensely thick cloud

20 of smoke billowed out of the tailpipe and drifted around

21 the students, the buildings, and the trees. And ugly

22 sight that many of us have seen before.

23 Professor Dibble gave me a nudge and said, "Maybe

24 you should do something about that. And you know what? I

25 might be able to teach you a little bit about how to do 118

1 it." And what a great teacher he was.

2 That was the light switch moment and the uh-huh

3 moment for me that started me down this path of diesel

4 emission reduction. All of receiving my Ph.D. from

5 Berkeley where I worked on a number of diesel-emission

6 related projects, including alternative fuels and exhaust

7 aftertreatment, I worked for several companies in the

8 environmental technology area. There I came to learn

9 about a remarkable technology called the diesel

10 particulate filter, or DPF. As I learned more, I realized

11 that the filters were extraordinarily effective, having

12 the ability to essentially remove all of the particles

13 from the diesel exhaust stream. But at the same time,

14 they require complex strategies to help keep them clean.

15 This is the process we know as regeneration. And that's

16 when things started to get fun, as I realized this is a

17 full-on, no holds engineering effort requiring top level

18 thinking in the areas of catalysis, controls, sensors,

19 fluid dynamics, and heat transfer, the whole bag. It was

20 a playground for a Berkeley combustion scientist, and I

21 felt at home.

22 In 2001, I met Kevin Shannihan, the owner of

23 West whose company supplies diesel engines parts

24 and service to customers in the northern half of

25 California. At our first meeting, I told him I had ideas 119

1 for developing diesel retrofits devices and a small team

2 of very talented individuals who I thought just may be

3 could build something that would work. Kevin told me he

4 saw the marketplace developing here in California and he

5 wanted to start a company to respond to the needs of his

6 diesel engine customers, while also doing something good

7 for the environment. He suggested that we with join

8 forces. And this was the launching moment for Cleaire.

9 I can't thank Kevin enough for everything he's

10 done. First, on the business side, he provided the full

11 resources of his company and all the financing to provide

12 a safe environment to incubate Cleaire. He made the sales

13 and service organization available to me and my team so we

14 could view the world of retrofit through the lens of the

15 customer. He taught me a lot about the practical side of

16 trucks. This would help shape the transformation of a

17 technology solution into a practical solution that would

18 work in the real world.

19 But beyond the basics of business, I've come to

20 appreciate the value of Kevin's passion and vision, which

21 are vital to keeping these ideas alive. An unnatural

22 patients required to operate in a business driven by

23 policy and regulation, but at all times unwavering faith

24 that somehow, someway we would be successful.

25 I've also learned from Kevin a great deal on the 120

1 personal side, as we shared many victories and a few

2 defeats. He taught me that the idea of honesty, integrity

3 must always be a priority, that there are things more

4 important than just running a business and making money.

5 And to that, I'm extremely grateful.

6 Cleaire has been a journey, and I'm grateful that

7 despite some delays and setbacks along the way, this Board

8 has largely stuck to your plan to regulate the end use

9 diesel population in California and we've been able to

10 manage the challenges of application engineering and the

11 challenges of a complex verification process.

12 Now ten years into Cleaire's life, the company

13 has sold more than 13,000 retrofits. We've upped the

14 number since the application. We are a market leader in

15 California. The company is on solid financial footing

16 with operations in the Bay Area and San Diego. Our

17 company has created hundreds of green color jobs within

18 the state to support the design, to manufacture

19 installation and support of diesel retrofit devices. And

20 now we're starting to explore international opportunities

21 as our reputation and the reputation of CARB's diesel

22 retrofit program is spreading.

23 To me, Cleaire is a great California success

24 story. You, the ARB, recognize the severe health impacts

25 of diesel emissions and took actions to passing of 121

1 regulations to clean up the in-use fleet of diesels. Our

2 engineering team was educated and prepared by the State's

3 university system to solve one of the great problems of

4 the state.

5 A visionary entrepreneur, Kevin Shannahan poured

6 his heart, soul, and capital into launching the company

7 with a belief that he could provide a solution to his

8 customers. High quality jobs and economic benefit is fed

9 back to the state, and all the while the air gets cleaner.

10 Cleaire is the story about California's coming

11 together to solve problems. The best part is that the

12 story doesn't end here. In fact, it's just beginning. I

13 believe that in the next five to ten years our in-stream

14 will play a role in the near elimination of diesel PM

15 emissions in the state. I believe our business will

16 expand throughout the country and the world, helping

17 others solve air quality problems while bringing economic

18 prosperity to California through the creation of more

19 jobs. This is a vision and a plan that I'm immensely

20 proud to be part of.

21 Thank you.

22 (Applause)

23 CHAIRPERSON NICHOLS: What a wonderful way to end

24 our meeting. You really do us all honor by your work, and

25 it's been a terrific partnership. So thank you. 122

1 And we will be adjourned.

2 (Whereupon the Air Resources Board meeting

3 adjourned at 12:08 PM)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25 123

1 CERTIFICATE OF REPORTER

2 I, TIFFANY C. KRAFT, a Certified Shorthand

3 Reporter of the State of California, and Registered

4 Professional Reporter, do hereby certify:

5 That I am a disinterested person herein; that the

6 foregoing hearing was reported in shorthand by me,

7 Tiffany C. Kraft, a Certified Shorthand Reporter of the

8 State of California, and thereafter transcribed into

9 typewriting.

10 I further certify that I am not of counsel or

11 attorney for any of the parties to said hearing nor in any

12 way interested in the outcome of said hearing.

13 IN WITNESS WHEREOF, I have hereunto set my hand

14 this 9th day of August, 2011.

15

16

17

18

19

20

21

22 TIFFANY C. KRAFT, CSR, RPR

23 Certified Shorthand Reporter

24 License No. 12277

25